The best managed fund

The best managed fund

Many of our readers are familiar with the expression “past returns are not indicative of future returns”. It is the standard text that comes with any advertisement or research for share market based investments. NB You will never hear this statement from your local real estate agent!.

The fact is, many people still look to past returns to help make decisions about their investments. That is why fund managers that have high past performance attract more investors through advertising, despite evidence that such performance “typically fails to persist in the future”. The use of past returns for investment decisions can apply to

Real estate returns – historically these have been very attractive (on average) over long periods.

Asset class returns – eg. shares Vs property Vs cash. There is clear evidence that best performing asset classes rarely keep top spot for long. Yet given returns on US shares last year, we can bet that investors will be flocking there in the hopes of riding a second wave.

Managed fund returns – when selecting managers, even advisers can fall into the trap of picking managers with great past performance. What’s clear from the data is that much like the asset classes above, best managers rarely maintain top spot for long.

As advisers, part of our job is to review managed funds that our clients are invested in, as well as perform regular internal research on funds for new and existing clients that are likely to perform competitively in their category. This is of course on top of the Market Valuations which we use to guide our strategic asset class weightings.

It takes a lot more than good past returns to make the cut, because we are well aware of the biases that can lead to poor investment decisions. Some of the traits we look for are:

  • Consistent ranking amongst peers
  • Competitive risk vs return relationship: that is where a manager has achieved a relatively high return for given level of risk or volatility
  • Experience of the managers and level of staff attrition
  • Fund objectives and success rate: most funds have a unique objective set by the managers. Failing to achieve them consistently is a bad sign.
  • Cost: we are not dogmatic on minimising cost, some of the best funds we know can be quite high when compared to index funds. What we look for is the cost relative to peers, and whether they are adding value for their fee.

There are so many different factors that go into researching an investment. It’s something that we don’t take lightly as financial planners that specialise in investment strategy amongst other areas. The final ingredient is always patience. Just like property, share based investments also need time to show results. You shouldn’t sell within weeks or months of buying an investment, unless there is a compelling reason to do so.

By applying this disciplined approach, we assist you to make informed decisions and maximise the likelihood of you reaching your financial objectives.

About Reuben Zelwer


Reuben Zelwer established Adapt Wealth Management in 2011 to help time poor clients achieve financial freedom. For over 15 years, Reuben has helped professionals, executives, business owner and those approaching retirement make the most of their circumstances by making good financial decisions. Reuben’s professional practice is complemented by substantial voluntary work, which has included setting up financial literacy and savings programs in the local community.