• When considering the risk of capital loss, there is little evidence to show that a manager who has done well in protecting from the downside will do as well in the future.
Other performance metrics tend to prove there is low probability that a manager achieving success in the past will be able to repeat success in the future.
Based on these results I would conclude, as part of their due diligence, investors should spend little time analysing the past performance and track record of the manager.
Analysis of past performance should only be used to assess whether the manager can consistently apply their investment philosophy, alongside portfolio activity. This is theonly information you will get from studying past returns.
Charles Younes is research manager at FE
