I love my job as each week an exciting array of new investments land on my desk, and I get to do a deep dive on behalf of my clients to see if any of the investments are worthy of further consideration. Working in the high-net-worth space, it never ceases to amaze me what fund managers and investment providers will try to suck people into using their investments.
Over my long career I have seen a full array of tactics but last week I was particularly amused when a major fund manager touted a fund that had only existed for 3 months, but I was surprised to find in their slide deck, a performance track record spanning back to 2019! Amazing! Not unsurprisingly, this imaginary performance was quite outstanding. I guess that is what happens when you have the power of hindsight and get to make it up!
Giving them some credit there were a couple of indicators that their performance wasn’t real, but it would be easy to miss if you weren’t paying attention to the detail. There were the small words “pro-forma” in the title, the 3 months of actual performance was a slightly different shade in the table and there was a small footnote leading to a completely different page which gave a long-winded explanation over several footnotes of how they had concocted their brilliant performance. Personally, I would have preferred they had sharpened it down to one footnote that simply stated, “we made it up”. Clear, concise and to the point.
At the end of the day, when you are a fund manager your performance track record matters. Having a clean and clear track record over a few years is an important input into the assessment of a fund manager’s skill in managing money. Indeed, everyone goes through bad patches in performance and market conditions do not always favour every investment style. This is why you have a diversified portfolio of investments. However, being presented with a track record which has been manufactured was of no use to me in assessing the potential performance of this fund and indeed it was one of the factors that resulted in me advising my clients not to proceed in placing any money into this fund. So fellow investors beware, when you are presented with a performance track record, make sure you are clear as to whether it is real or imaginary.
If you would like to find out more about how we work with our high-net-worth clients, please contact us here.
Kind regards,
Shelley Marsh
Outsourced Chief Investment Officer (OCIO) & Founder
Wealth Differently
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