Wear earmuffs

Statistical noise can be damaging to your investment health

Anne Cabot Alletzhauser, CIO at Advantage Asset Managers, warned IFAs to avoid performance surveys like the plague, especially when making investment decisions for their clients.

"Performance surveys are full of dangerous noise.  Surveys that say three years of performance should give you some form comfort - not so. It is at this point that the fund managers performance will usually change," says Cabot-Alletzhasuer.

"We have a big data problem in South Africa. We don't have enough fund managers who have been around long enough - let alone 10 years ago, who are doing the same things they were doing 10 years, five years or even last year."

It also appears that IFAs will do the right thing and diversify their clients' money by placing it with different fund managers. The problem here is that the over or under performance is almost entirely due to market movements.

And thus the question of why investors should be paying for performance raises its head, when the majority of funds performance in SA is a function of the market?

Editor's thoughts:
* Much has been said about performance and looking in the rearview mirror when it comes to manager performance
* Its also refreshing that there are professionals out their prepared to comment on the real issues with real insights