Past performance is no guarantee...

So the disclaimer goes on virtually any Product Disclosure Statement or financial services product's marketing material, as required by ASIC. This is understandable, but equally interesting considering past performance is one of the most important pre-requisites for most, if not all, investors when considering a managed fund.

Casting one's eye over the performance of funds as a whole, and the various strategies employed by the 430+ funds listed on www.fundmonitors.com, provides a pretty good reason for ASIC and the lawyers to insist on the "Past Performance" caveat.

Individual fund returns over previous periods range as follows:

So while past performance has obviously NOT been a good indicator in some circumstances, in many others it has been no surprise. And for clarification, we're not just talking about the outlying numbers - good and bad. Hidden in the averages are some real disappointments.

Given the extraordinary circumstances in which markets - and every country in the world for that matter thanks to COVID-19 - find themselves, it is no wonder that only 20% of funds YTD have provided positive returns. However, closer analysis shows that 76% outperformed the ASX200 in March, 77% YTD, and 99% did so over 12 months.

On the negative side (say -40% or more in March) there were combinations of "truly disappointing" through to "not surprising". On the positive, none were particularly surprising as their strategy (long/short, long vol, option protection, or managed futures for instance) suggested that would be, or should have been, the expected outcome.

Most heartening for many investors has been the fact that many absolute return funds have protected them from much, and in some cases ALL, of the falls in March, YTD and over the past 12 months.

Having said that, picking the winners from the losers requires more than just a cursory glance at past performance. Drilling down into advanced analytics, down-capture ratios and other downside indicators are essential, although even these may not be foolproof.

Understanding their strategy, risk limits and compliance helps, as does an understanding of the people behind the performance. The manager's track record covers more than just the numbers.

And on that note, we wish everyone a safe ANZAC Day, as we pause to spare a thought for those who faced real risks to keep us safe - and those on the front line such as health workers and others who, in the current crisis, continue to do so.

ANZAC Day won't be quite the same without a chilly start at the War Memorial, or at the dawn service overlooking Bondi Beach. However, hopefully everyone will extract themselves at 6 AM tomorrow morning to stand on their balcony or driveway to remind ourselves how lucky we are to only be figuratively "locked down".

Like most of those we speak with, Hedge Clippings has moved to the home office environment in response to the COVID-19 pandemic, and we have been pleasantly surprised at how seamlessly we have adjusted to the new regime. A significant part of the ease with which we seem to have adjusted lies in the fact that as a business which provides online information and services, there has been little change to the technology we use on a day to day basis.

Others are obviously not so lucky, and are either unable to work, have seen their employers close their doors, or find operating "normally" a thing of the past. We should therefore keep them in mind while counting our own blessings.

In fact, if anything, the enforced change has merely served to emphasise, or indeed accelerate, our reliance on good IT and communications to keep the wheels in motion. Zoom, which has become a household name over the past month or so, had been part of our daily office routine for some time. Equally, most fund managers, advisors and investors, whilst significantly affected by the market's volatility, have been able to continue despite having had to adapt to the new communication rules.

Probably the most significant change at Fund Monitors, and for asset managers, has been the increased importance of IT systems and information in general, and in particular the move to - or acceptance of - video communications. Whilst this has been a trend for some time, necessity has made it commonplace, such that even post-pandemic and lockdown we suspect it will become the new normal.

In line with that trend, this week we spoke with two fund managers, Alex Pollak from Loftus Peak and Robert Swift from Delft Partners, to discuss how they see the world - and particularly the investment world - going forward. With apologies for the less than perfect production quality courtesy of the work-from-home restrictions, the result was an excellent insight into the investment thinking of two managers whose investment strategies have resulted in not having to be overly focussed on the short-term market volatility. You can watch the twenty minute interview here.

We also caught up with Dean Fergie from Cyan Investment Management whose CG3 Fund has a more active style, investing in the Australian small-cap sector, and requiring a more nimble approach to adjust for the headwinds affecting the travel, tourism and leisure sectors in particular. Dean's interview lasts around seven minutes and can be seen here.

More broadly, fund returns for March have been as mixed and varied as the markets. Most finds have performed in line with expectations - both positive and negative - although there have of course been more of the latter given the markets. Certainly, there have been a few significant disappointments from managers not prepared to change and/or able to adapt quickly enough.

On the plus side, one quarter of all funds that have reported their March results so far have been positive YTD, with that number increasing to 90% over 12 months, and with over 99% outperforming the ASX200 Accumulation Index over the past year.

Inevitably the best performing strategies have been the true "alternatives" - managed futures, currency/FX and Global Macro amongst them. Having rallied sharply from the lows of March 23, there are those who believe the worst is behind us, and others who are more cautious.

Time will tell, but caution when managing other people's money would seem a sound approach to us.