Tag Archives: performance trickery

Jul 20, 2020

Performance Trickery, part 4

As a potential investor, would you be impressed by the pattern of fund returns summarized in Exhibit 1?  (I would be.) Exhibit 1. Portfolio and Benchmark Cumulative Returns Over the course of 15 years, the portfolio in question notched a total return of 69%, versus only 50% for its benchmark.  The accumulation of added value…

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Apr 16, 2020

Performance Trickery, part 3

Success is hard to come by for active managers, as readers of our SPIVA reports know well.  Sometimes what appears to be stock selection skill is in fact simply a byproduct of style drift across the capitalization scale. A majority of large-cap active managers outperformed the S&P 500 only 3 times in 19 years of…

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Apr 30, 2019

Performance Trickery, part 2

Here is a 22-year history of a (hypothetical) actively-managed portfolio and its benchmark: Results have been decisively mediocre. The portfolio outperformed in only five years out of 22, for a hit rate of 22.7%. Its cumulative return (68.2%) lagged that of the benchmark (74.0%), and its volatility was higher (4.79% vs. 4.25%). The manager’s marketing department…

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Sep 10, 2018

Performance Trickery

Suppose you, as a hypothetical financial advisor, encounter a hypothetical marketer who presents the following hypothetical performance data: Last Year Trailing 3 Years Trailing 5 Years Trailing 10 Years Portfolio 25.0% 11.9% 16.0% 8.8% Benchmark 21.8% 11.4% 15.8% 8.5% Not only did the portfolio beat its benchmark handily in 2017, says our marketer, but it…

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