More ‘honesty’ needed in performance numbers

More ‘honesty’ needed in performance numbers

Funds management performance reporting is much too "selective" to be useful to investors, argues Forager Funds.

Speaking to InvestorDaily, Forager Funds chief investment officer Steve Johnson said he objected to the selectivity of funds management performance reporting.

Over any five-year period, there will a period when any fund manager's performance statistics are suitably impressive, Mr Johnson said.

"People think: 'As long as I'm different enough from the index, and I'm showing the performance numbers, [that's enough]'. People should be more honest about that," he said.

Mr Johnson said that while Australian equities indices returned investors close to zero for the year to 30 June 2016, the average stock returned more than 10 per cent.

"So if you threw a dart at a dartboard, you would have done 10 per cent," he said.

"You’ve got all of these fund managers running around saying: 'We outperformed the index by 10 per cent'.

"Well, you just need to be a little intellectually honest about that and point out that the index wasn’t representative of the average stock over the course of the year."

As for the current trend towards absolute return funds, he said it is "unlikely to end very well".

"Most of them are high cost structures in order to take the volatility out [of the portfolio]. We’ve seen five or six market neutral products come to market this year that have performed pretty abysmally since January," Mr Johnson said.

"It was all off the back of 2015, when they were all short resources and long everything else – and that produced 20 per cent returns.

"I’m not saying it was the wrong decision – it was the right decision. But there’s nothing 'neutral' about it. It’s a leveraged bet."

Investors are better off with a reasonably balanced portfolio and accepting the volatility that comes with it, he said.

"Paying lots of fees to take some of that volatility out doesn’t make a lot of long term sense. But it’s particularly marketable at the moment, because the blue chips have performed poorly," Mr Johnson said.

Read more:

Banks to implement customer advocate role

Venezuela default could spark contagion

Pimco warns investors against complacency

Contango AM reinstated to ASX

CFS FirstWrap to integrate IRESS software


More ‘honesty’ needed in performance numbers
investordaily image
ID logo
promoted stories


investordaily image

Fortnum hires former Centric Wealth CEO

Staff Reporter

Deborah Ralston

SMSF Association names new chair

Katarina Taurian

Curtis Cifuentes

Avenir Capital hires investment director

Staff Reporter


Maurizio Canton

Striking a balance between security and innovation

Maurizio Canton

Greg Kuhnert

Backing China in the Year of the Dog

Greg Kuhert

investordaily image

The benefits of good data governance

Steve Singer