30th May 2007
Chasing investment returns – does it work?
You will have read many times, in the financial press and in financial advertisements, that “past performance
is no guide to future returns”. But when you see a handful of managed share funds posting returns of more than
40 per cent for the last 12 months, you may be tempted to chase those investment returns.
However, a recent study commissioned by Vanguard Investments Australia should make you think twice.
Vanguard commissioned researcher Morningstar to look at the performance of Australian share funds over the
10-year period to June 30, 2006 and the research shows that no one theme or investment style dominated the
league tables consistently.
In the year 2000, for example, the top five performing share funds posted an average return of 35 per cent.
The following year the same five funds delivered an annual return of only 9.2 per cent.
According to Morningstar, the top fund in 2000 achieved a return of 47.8 per cent for that year but the next
year underperformed the index and produced a return of only 7.6 per cent and then continued to under perform
the index through to 2006, making it the bottom-performing fund. Many of the top funds in 2000 failed to match
the index the following year - some by a large margin.
The study also highlighted another serious issue for investors - the simple issue of a fund's long-term survival.
Investors, particularly those saving for retirement, have long investment time horizons - but not even good
performance or investor loyalty can guarantee a fund's longevity. Almost 30 per cent of the funds analysed in
the Morningstar study do not exist today, while 18.8 per cent of the funds that appeared among the top performers
in any year were among those terminated.
La Trobe has been around for over 50 years, and we are proud to deliver consistent investment performance over a
range of market conditions for investors in the La Trobe Australian Mortgage Fund.
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Head of Funds Management
t +61 3 8610 2811
Chris Andrews is the Head of Funds Management for the La Trobe Group and has responsibility for the La Trobe Australian Mortgage Fund.
Read full profile here.
La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 115 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.
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