Looking through the history of various funds, investment trusts and similar, one gets the impression that in the majority of cases investors could have waited out the recent recessions with no real long term loss, as the dramatic decreases in value have been followed by a reasonable recovery of value in almost all cases. Obviously a great many companies were not fortunate enough to survive the recession, but were funds and trusts closed as well? Is the impression one receives while browsing the history of currently available funds misleading as a result?

  • funds close all the time. yes you can lose your money, or managers get tired of being money managers. the end. – CQM Jun 11 '15 at 21:38
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    Mutual funds don't usually close for business in the sense of all the securities are sold, the cash distributed among the shareholders, and the management team finding jobs elsewhere. Most mutual funds are part of a fund family, and usually a poorly performing fund is merged into a better-performing fund in the same family and the shareholders of the bad fund get shares in the better fund. This helps the image of the fund family. In comparing fund performance over long period of time, one needs to take into account survivor bias – Dilip Sarwate Jun 12 '15 at 3:33

Yes, many hedge funds (for example) did not survive 2008-2009. But hedge funds were failing both before and after that period, and other hedge funds thrived. Those types of funds are particularly risky because they depend so much on leverage (i.e. on money that isn't actually theirs).

More publically-visible funds (like those of the big-name index fund companies) tended not to close because they are not leveraged. You say that "a great many companies" failed during the recession, but that's not actually true. I can't think of more than a handful of publically-traded companies that went bankrupt. So, since the vast majority of publically-traded companies stayed in business, their stocks kept some/most of their value, and the funds that owned those stocks stayed afloat.

I personally did not see a single index fund that went out of business due to the recession.

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  • Hi dg99, thank you for your answer. I perhaps should have specified in my original question that I was not referring to simple tracker/index funds, as I would expect these to continue regardless of poor performance of the items they are tracking, but was referring more to managed funds. I think that this, and the notes from @Dilip_Sarwate above more or less answer the question though, in that Survivor Bias is definitely something to take into account when reviewing the historic performance of funds/companies/etc during the years of a recession. – seekingknowledge Jun 13 '15 at 16:48
  • I see what you're getting at. Survivorship bias is a two-edged sword: it can mislead you to think that actively managed funds (as a group) do better than they actually do; but if you're looking for a particular managed fund to invest with, then any fund that made it through 2008 is at least better than the ones that didn't. :) – dg99 Jun 15 '15 at 20:45

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