Miss­ing the point

Finweek English Edition - - COMPANIES & INVESTMENTS -

Ihave no de­sire to get into a slang­ing match nor do I have the re­search ca­pa­bil­ity that as­set man­agers do, but I think that Clyde misses the point of the ar­ti­cle. There is no dis­put­ing the fact that the In­vestec Op­por­tu­nity Fund has de­liv­ered ex­cel­lent (his­toric) re­turns, but th­ese have been while the fund was sig­nif icantly smaller.

A quick look at Morn­ingstar f ig­ures shows that his fund was just over R11bn two years ago (Oc­to­ber 2010).

The fig­ures also show that it has more t han dou­bled i n size i n t he past 24 months while the his­toric re­turn over the pe­riod is around 15% per an­num. This means that much of the in­crease in size is due to inf lows (prob­a­bly as a re­sult of the ex­cel­lent past per­for­mance).

While there is no deny­ing the past per­for­mance the ar­ti­cle and re­search sug­gest that it will be dif­fi­cult to main­tain the de­gree of out­per­for­mance go­ing for­ward and a quick look at the past three years’ re­turns from the fund sug­gest that this may in fact be the case.

In fact, if one looks at the re­cent re­turns of the funds men­tioned in the ar­ti­cle (ie since they have be­come “huge”) then the re­cent ret urns seem to sup­port t he re­search. The no­tion of a “con­sis­tent win­ner” is also f lawed.

The “con­sis­tent” win­ner is only avail­able af­ter the fact (and not be­fore the time).

Look at the re­cent per­for­mance of the past “con­sis­tent” win­ners – they have al­most all per­formed be­low the av­er­age (in fact I re­mem­ber read­ing some re­search a while back that sug­gested that you would be bet­ter off fol­low­ing a strat­egy of in­vest­ing in the worst per­form­ing fund each year than the best per­form­ing one.

Gregg Sned­don

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