Investment performance surveys - the noise and the knowledge 

AMP Capital, Greg Fleming
Head of Investment Strategy
New Zealand

Returns-chasing investors value top-performing funds and prioritise them for their investment allocations. But what does ‘top-performing’ actually mean? The naïve answer is that this is self-evident – the funds with the highest rolling returns over a given period – but this concept is quite misleading.

Because investors are all targeting a different future point at which their accumulated funds will be converted into cash and redeemed from the fund, commentating on which fund is ‘ahead’ at a given month, quarter or year-end is of limited relevance, unless that date coincides with an investor closing out their investment. At that point, the investor could assess whether they had chosen wisely or otherwise.

Ranking investment funds as if they were realising their accumulated returns at a specific point in time is no more than a ‘convenient fiction’. It satisfies a human need for estimation, but is of almost no practical use and can frequently lead to mistaken assumptions about both the risk undertaken in achieving a particular reported investment return and likely future performance.

Here are some crucial facts about reported/ranked investment performance, and six important warnings about reading too much into investment performance ranking lists. Click here to read more. 


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