Performance demands anxiety

Tuesday, 27 February, 2001 - 21:00
ONE of the biggest challenges financial planners face is getting clients not to focus on short-term performance, firstly as an indicator of future near term returns and secondly as an indicator of long-term results.

For the year to December 2000, the vast majority of balanced fund man-agers had a return of 5 per cent to 8 per cent (net of fees).

The table right shows how some of the major balanced funds fared over a longer (more appropriate) time frame.

Trying to assess results from short-term performance can give a misleading picture. For instance, does it seem logical to compare results of a year (or less) when investment markets are effectively factoring in a short recession to what one would expect in normal times, or worse still the buoyant times of the past three years?

Astute investment managers would suggest, “If the long-term average is higher than the most recent past period, in all likelihood a better result is likely to follow.” No one however, is game to say when.