It would be true to say that the “proof of the pudding is in the eating” but when it comes to past performance, investors need to be careful to understand exactly where that past performance comes from.
Too often, the big marketing machines of our investment institutions come out, all guns blazing, with graphs and figures depicting how well one of their particular funds has performed.
WHEN WE CONSTRUCT PORTFOLIOS FOR CLIENTS, RISK ADJUSTED RETURNS ARE ALWAYS TAKEN INTO ACCOUNT WHEN SELECTING FUNDS
What they don’t do of course, is to continue the coverage when that performance slows down. The advertising machine switches off, leaving poor performance to be suffered by the investor.
Then there is the ingredient of risk – how much risk is the fund manager taking to achieve the investment return – many investors don’t take account of this.
In our view, fund performance is the icing on the cake but not the cake.
Asset allocation and diversification are key ingredients to performance, but even then, without regular re-balancing of portfolios, risk can become skewed and many investors are not aware of this.
We are delighted with the returns we achieve for our clients and we are more than happy to compare ourselves against other funds. FCA regulations insist that past performance is presented in a very specific way so as not to mislead investors. You can read the FCA guidelines which we adhere to.
