Trailing, Rolling, Annualised, Discrete?

threlkeld53

Could someone please explain what is the best way to analyse a fund's past performance.

For example looking at a fund's history on iweb, they usually give discrete, trailing and annualised percentages for 3, 5 and 10 years. I sometimes see the word 'rolling' also, so I wondered what is the best way between these 4 sets of data to give the best indication of any particular fund.

Thrugelmir

Against the benchmark that the fund uses. If there's an appropriate one of course. 

BritishInvestor

Thrugelmir said:

Against the benchmark that the fund uses. If there's an appropriate one of course. 

I would suggest that very few people know how to confirm the benchmark is appropriate.

Thrugelmir

BritishInvestor said:

Thrugelmir said:

Against the benchmark that the fund uses. If there's an appropriate one of course. 

I would suggest that very few people know how to confirm the benchmark is appropriate.

Funds normally dislose and compare to their choosen benchmark. Which is an established market index. 

BritishInvestor

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

Against the benchmark that the fund uses. If there's an appropriate one of course. 

I would suggest that very few people know how to confirm the benchmark is appropriate.

Funds normally dislose and compare to their choosen benchmark. Which is an established market index. 

Yep, but that doesn't change my point. You need to select an appropriate benchmark. For a fund that is invested in US large-cap growth/tech, MSCI World is arguably about as relevant as the wholesale price of cockles.

Thrugelmir

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

Against the benchmark that the fund uses. If there's an appropriate one of course. 

I would suggest that very few people know how to confirm the benchmark is appropriate.

Funds normally dislose and compare to their choosen benchmark. Which is an established market index. 

Yep, but that doesn't change my point. You need to select an appropriate benchmark. For a fund that is invested in US large-cap growth/tech, MSCI World is arguably about as relevant as the wholesale price of cockles.

That's a multitude of indexes available. MSCI alone has over 160,000 to chose from. 

BritishInvestor

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

BritishInvestor said:

Thrugelmir said:

Against the benchmark that the fund uses. If there's an appropriate one of course. 

I would suggest that very few people know how to confirm the benchmark is appropriate.

Funds normally dislose and compare to their choosen benchmark. Which is an established market index. 

Yep, but that doesn't change my point. You need to select an appropriate benchmark. For a fund that is invested in US large-cap growth/tech, MSCI World is arguably about as relevant as the wholesale price of cockles.

That's a multitude of indexes available. MSCI alone has over 160,000 to chose from. 

I used MSCI World as that was the benchmark used for a couple of funds I looked at recently. 

cfw1994

threlkeld53 said:

Could someone please explain what is the best way to analyse a fund's past performance.

For example looking at a fund's history on iweb, they usually give discrete, trailing and annualised percentages for 3, 5 and 10 years. I sometimes see the word 'rolling' also, so I wondered what is the best way between these 4 sets of data to give the best indication of any particular fund.

Well, I am perhaps very amateur at this, but I would start by checking the 1/3/5/10 year numbers.   Trustnet or similar to find the factsheets.
That's a decent starting point, before you delve into whether there are differences, etc: see how that fund is comparing with things you do perhaps know, or just other funds to compare.
The benchmark thing is a red herring, IMHO....different funds chose to use different benchmarks (although it might be reassuring to know you are in the top quartile, I guess)

gm0

There is no best way that will work all the time.  You need available data, net the actual fees you will see, on the exact same time windows, on same calculation basis, to compare A and B to any useful accuracy given the differentials. 
It is amazing how often this condition is not met by available data on pension funds.  And how unhelpful some fact sheets/KIID are.

For me the gold standard is ability to compare daily unit prices and from that multi-year annual performance over many years.   Against the relevant country or global total return index for that asset class to get a net fees view against "the market" for that component of the portfolio e.g. UK equities (FTSE All Share TR). You have to get hold of index data and fund data for the relevant funds to check through it at that level.

More practical for fund shopping is to get a view in your head/spreadsheet on what was "the market" for global or US or UK equities in a given calendar year and to be able based on the role of the fund to loosely validate that the prospective fund behaves the way you think it should (albeit with a layer of under/over performance overlaid if it's active and actually tracking net fee drag if it's passive.

BritishInvestor

cfw1994 said:

threlkeld53 said:

Could someone please explain what is the best way to analyse a fund's past performance.

For example looking at a fund's history on iweb, they usually give discrete, trailing and annualised percentages for 3, 5 and 10 years. I sometimes see the word 'rolling' also, so I wondered what is the best way between these 4 sets of data to give the best indication of any particular fund.

Well, I am perhaps very amateur at this, but I would start by checking the 1/3/5/10 year numbers.   Trustnet or similar to find the factsheets.
That's a decent starting point, before you delve into whether there are differences, etc: see how that fund is comparing with things you do perhaps know, or just other funds to compare.
The benchmark thing is a red herring, IMHO....different funds chose to use different benchmarks (although it might be reassuring to know you are in the top quartile, I guess)

The benchmark isn't a red herring. People may buy a fund because it
1. It has vastly outperformed its benchmark
2. It has great recent returns and appears on platform best buy lists
3. It has outperformed "similar" funds
whereas all of these should be reasons to dig a little further before buying. 

Linton

I dont see there is any point in comparing a fund against a benchmark if the benchmark is not actually investible or does not truly represent the fund.  What do you do if the performance is poor? You really need to compare against other real alternatives that meet the objectives for wanting a particular fund.

When comparing performance I only glance at 1yr/3yr/5 yr/10yr because these figures can be strongly influenced by what happened over a short time period possibly recently or possibly 5-10 years ago.  So when I really want check performance of a fund against other possibilities with the intention to buy  I prefer to look at  the individual year by year values to see how they vary.  This may show up one fund being more volatile than another or a consistent pattern of outperformance.  Another worthwhile check is to see how they performed during market crashes. Sadly thougth the last real crash in 2008 is too long ago for much to be learnt except for sectors such as Wealth Preservation where the funds reason for existence is to have a viable long term strategy.

Having identified a significant performance difference, before one buys it is important to identify the cause.  Usually it is because the funds invest differently.  eg some high performing funds in general sectors are actually focussed towards small companies or tech.  If you want a small company or tech fund, fine. But if you dont there is no point in buying one because of apparent high performance relative to what you really want.