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Performance
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consistency is the key ...
ROTHSCHILD
REPORT NO.19
In a recent
Rothschild Report we outlined the tendency for some investors
to look at short-term performance figures when selecting a fund manager.
We gave a few tips on analysing the performance tables, the most important
one being to first consider your investment timeframe. Another aspect
of performance analysis is the ability of a fund manager to sustain
good returns over time. One of Rothschild's main goals is to provide
investors with consistently competitive performance. Let's
look at what we mean by this.
Why is the
issue of consistency so important? Consistency gives you more certainty
over your money. It means the returns on your investments are less
volatile. But consistency is not easy to achieve. It is very rare
for a top performing manager one year to sustain this performance
over future years. A manager would need to read the markets correctly
every time; almost impossible without a crystal ball. Maintaining
top performance also means risking investors' money, something most
fund managers would not consider.
Independent
research house, InTech, recently analysed the three-year performance
of a number of fund managers over four different time periods. Only
two managers appeared among the top performers in more than one of
the periods analysed. One of them was Rothschild, which was ranked
fifth for two three-year periods.
This was
due to our disciplined approach to investing and our value investing
philosophy.
As a value
investor, Rothschild looks for companies or securities that have not
been correctly priced in the market, but show the potential for good
long-term returns. We aim to buy when the price is low and sell when
we consider it too high. Because of this approach, there may be some
lag time before the security's price recovers. Over the long term,
however, this process leads to consistent performance.
Being a
consistent performer does not mean you have to compromise on results.
Rothschild's disciplined investment approach means that we are competitive
against other fund managers and the markets. For example, our Balanced
Superannuation Trust is currently ranked 13th over one year and sixth
over five and seven years in the William M Mercer Survey to 30 September
1999.
Performance
is an important characteristic when selecting a fund manager. However,
you need to be careful when comparing numbers. First, you should review
performance relative to your investment timeframe. For example, if
you are investing for your retirement in 20 years time, you would
look at the performance figures of a fund manager over at least five
years.
Second,
you should consider how consistent a fund manager has been. Are they
top of the table over the short term, but bottom over a few years?
You should also consider looking at different time periods. How does
their performance compare to this time last year?
Selecting
a fund manager who will help you in your wealth creation takes careful
consideration - don't rush into it.
For
information about Rothschild telephone 1300
65 65 68
between 8.30am and 5.30pm (Sydney time), Monday
to Friday,
or visit our website at www.rothschild.com.au.
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Disclaimer
This
report has been prepared for general information only and does not
contain and is not to be taken as containing any securities advice
or securities recommendation.
Investment in any Rothschild managed investment may only be made on
the application form attached to the current prospectuses or offer
documents which are available from the Manager, Rothschild Australia
Asset Management Limited (ACN 000 727 659) and which have been lodged
with the Australian Securities & Investments Commission where appropriate.
Rothschild receives fees from the issue of units in these funds and
from time to time holds units that it has repurchased which it may
resell at a price which is higher than the price it paid for the units.
Rothschild may also vote on such units subject to the provisions of
the relevant Trust Deeds.
Nothing in this material constitutes an offer of any investment or
an invitation or solicitation to subscribe for or purchase any investment
to any person in any state, foreign country or jurisdiction where
such offer or solicitation may not lawfully be made.
The information is based on Government laws and regulations current
at time of issue (August 1999). This information is not intended to
be relied upon for the purpose of making an investment decision. This
material provides general information only and does not constitute
financial advice or a recommendation in respect of any Rothschild
product and should not be relied upon as such.
The material is made available in good faith by Rothschild and has
been derived from sources believed to be reliable and accurate. However,
it is not intended to be a complete description of the matters described
and Rothschild assumes no responsibility for updating any information
contained in this material or for correcting any error or omission
which may become apparent after the material appears on the Internet.
Copyright in the material reproduced on these pages is owned by Rothschild.
Except to the extent otherwise permitted by the Copyright Act 1968
(Cth), the material may not otherwise be reproduced or displayed in
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of the foregoing, Rothschild does not permit reproductions of its
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in circumstances when it has not given its prior written consent.
Investments in the funds are not deposits with or other liabilities
of NM Rothschild & Sons (Australia) Limited (ACN 008 458 366) or of
any other company in the Rothschild Group, and are subject to investment
risk, including possible delays in repayment or loss of income or
capital invested. Neither the repayment of capital nor the investment
performance of the funds is guaranteed by NM Rothschild & Sons (Australia)
Limited, the Trustee or the other companies in the Rothschild Group.
AFSD
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