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".