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I'm interested in evaluating pension funds and was looking at some past performance figures. In particular these funds (see page 35).

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When I look at these figures, how does this relate to what I would have received as a return as an average investor? For instance, the Ethical Fund had a 20.64% performance in 2015. If I'd had money invested in this fund, would I have seen a 20.64% (minus charges) increase? Is it that clear cut?

I'm aware that past performance is no indication of... etc. I'm also not asking for opinions on this particular provider (NEST). I'm just trying to make sense of the published figures in a hypothetical model.

  • please remember that past performance is not necessarily indicative of future performance! – MD-Tech Feb 17 '16 at 11:11
  • Thanks. From these figures though, could I infer that had I had money in that fund, I would have seen my pensions fund grow by 20% (minus charges)? – Adrian Thompson Phillips Feb 17 '16 at 11:17
  • Past performance is certainly not a GUARANTEE of future performance. But it's an awfully good indicator. If a company has been losing money year after year, of course it's possible that next year they'll suddenly rebound and make a billion dollars. But probably not. If you know that a company or a fund has new management or is adopting a new strategy, yes, things could change, one way or the other. But if they're continuing to do what they've done in the past, odds are they'll get similar results. – Jay Feb 17 '16 at 17:49
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The answer is yes: had you invested your money at the exact time that period of performance was measured from (1 Apr 2014 in the example you gave), you would have received that overall return, and yes that's before charges.

So in one sense yes it's clear enough. However, one caveat with looking at sets of figures like this…

Percentages over successive periods can be misleading, here's why:

If you were to look at a fund with a -20% return in Year 1 then a +25% return in Year 2, it sounds like capital would be up 5% over two years right?

Not so:

  • £1,000 with a -20% return during Year 1 = £800
  • £800 with a +25% return during Year 2 = £1,000

A quote attribute to Paul Tudor Jones goes like this:

If you lose 50%, it takes 100% to get back to where you started—and that takes something you can never get back: time

So just bear that in mind and it should be OK… and it sounds like you already know this, but of course you should select funds based on your conviction in their future performance rather than be persuaded by recent track record.

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