Fund and market performance: Don’t look in the rear-view mirror

This quote is famously attributed to Peter Drucker, the well-known American consultant and management thinker.

But, honestly, it is intuitive in your daily life to use the past as a trusted informant when making choices. Would you return to a restaurant if the food was great? Most likely. Would you order another electronic device from an online store that sent you a faulty product last time? The chances are slim.

Roland Gräbe, head of discretionary fund management at Old Mutual Wealth, says it seems every investor who reads the disclaimer believes it is meant for somebody else. “Interpreting the past in this way seems to be a much more reliable indicator of future behaviour,” he says. “If you study markets over the long term, across geographies and across multiple timelines, different asset classes tend to deliver quite predictable long-term returns. However, a specific manager’s approach usually works best in a certain environment and will only work while that environment persists,” he says.Investment experts will therefore take the long-term past performance of an asset class into consideration, along with its valuation metrics, when looking for attractive markets.

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