The fund performance illusion
Date
2007-08
Authors
Wessels, Daniel
Kriger, Niel
Journal Title
Journal ISSN
Volume Title
Publisher
Stellenbosch : University of Stellenbosch Business School
Abstract
Research conducted at the
University of Stellenbosch
Business School into the
long-term performance of
equity fund managers found that past
performance was not a reliable indicator
of future performance. The study links
up with the trends revealed by previous
international and local studies and
found relative persistence in yields in
the short term, but short-term results
did not have long-term predictive value.
The longer the investigation period, the
more the performances would adopt a
random up-and-down movement.
The clear message from the research
is a warning to investors. Do not put your
trust in one active manager only. In the long run, a particular fund’s performance
may deviate substantially from its recent
track record. The study thus exposes the
danger of accepting current performance
as the sole predictor of future
performance and suggests, especially
for longer-term investments, that investors
must become better acquainted
with the investment philosophies and
decision strategies of fund managers
before making investments.
Description
Keywords
Equity fund managers, Fund managers, Investment analysis
Citation
Wessels, Daniel, Kriger, Niel. 2007. The fund performance illusion. USB Leaders Lab, 20-22, August.