The Economist:

CALL it hyperactivity, call it the temptation to fiddle. Chief executives have a tendency to make acquisitions just to show they are doing something. Similarly, fund managers, sitting at their desks all day, have the urge to trade. Otherwise why go into the office at all?

But these trades inevitably incur costs, and not just in the form of fees disclosed to mutual-fund investors as part of a fund’s total expense ratio. When a large fund sells its stake in a small company, for example, the share price may fall significantly as supply overwhelms demand. A recent paper* in the Financial Analysts Journal (FAJ) found these hidden costs were, on average, higher than the funds’ declared expenses and had a significant negative impact on returns.

The academics looked at the record of 1,758 American equity mutual funds between 1995 and 2006. They estimated trading costs by looking at changes in portfolio holdings (which are revealed every quarter), checking the bid-ask spreads for the stocks concerned and making an allowance for the price impact of trades.

Dan McCrum:

The Berkshire Hathaway annual meeting is like Woodstock for capitalists. It draws tens of thousands of shareholders, value investors, groupies and the curious to the midwestern city Omaha, Nebraska.

They make the pilgrimage each spring to sit at the feet of Warren Buffett and Charlie Munger, the two men who have spent half a century building a sprawling $260bn conglomerate.

The FT’s Dan McCrum was there to capture the weekend festivities and the wise words from the pair of octogenarian sages.
3:53pm

I’ve landed in chilly Omaha, a big open city spread along the Nebraska side of the Missouri River, and its starting to fill up with eager investors from around the world. You can spot some of them carrying the 2013 annual report, required reading among the faithful, and by sound of discussion of the great man.

Matthew Goldstein:

Michael Marchillo, a plumber, has been trying and failing for months to buy a bigger home for his family here in Sin City. He was pre-qualified by a bank for a $130,000 mortgage, which a year ago would have landed a typical three-bedroom home in the area. No more. Now, the 36-year-old says, it’s hard to compete with “greedy investors” who come to the table flush with cash for quick deals.

Marchillo is on to something. The once-beleaguered Las Vegas housing market has been on fire since investment firms led by Blackstone Group LP, Colony Capital and American Homes 4 Rent began buying homes here some eight months ago, backed by $8 billion in investor cash to spend nationally.

These big investors and a handful of others have bought at least 55,000 single-family homes across the U.S. in the past year. In the Vegas area alone, they have accounted for at least 10 percent of the homes sold since January 2012, according to a Reuters analysis of housing transactions.