Fund performance 31
the meantime let’s look at what you can do to see if the fund is really
making your money work for you.
At the end of the day of course we are all interested in performance
and how much money we will make if we invest in a fund and entrust
our money to a manager. We also know that past performance is not
indicative of future performance. For the purposes of this chapter,
however, what I really want to do is assess this past performance and
determine what it might tell you about the fund.
The track record of a fund is its performance over the years and this
information is usually one of the easiest and most accessible to obtain.
To trumpet monthly returns is the basis of all fund marketing. A long
show of data is usually deemed to be a measure of stability and some
investors will require a minimum track record of three years or more
before they will invest. This is because an established fund with a long
track record provides more reliable information on past performance
that can be used to evaluate the fund’s current position and risk pro-
file, while a fund with little or no track record provides no basis of
comparison to evaluate its approach to investing. Though past per-
formance is not indicative of future results, a solid track record grants
additional insights into how the fund performs following certain
investment decisions and during different economic cycles. However,
a track record can be misleading and should be thoroughly checked.
For example, sometimes funds will merge the historical performance
of more than one fund. Further, the track record of a fund can be the
work of various individuals, leading to certain complexities when
it comes to understanding who was responsible for the results and
whether it was the product of one or more investment professionals.
Remember that the values noted on any factsheet or marketing record
depend on the manager alone and are not legally binding even if rules
apply as to how they are expressed (see more about that in Chapter 9).
It is therefore vital to check such data. This can be done easily by using