How relevant is the past performance of a fund scheme?
That’s a difficult one! Fund prospectuses will clearly tell you that “past performance is no indicator of the future”, but, on the other hand, many analysts will tell you that sustained performance over a reasonably long period of time is a good criteria. There is truth in both points of view. While past performance reflects the success of the fund manager, the broad investment strategy and related factors, it serves as no guarantee that the strategy will work equally well in the future. A change in the external environment could necessitate a change in investment strategy too. Again, past successes could imply that the probability of future successes is respectably high. So it’s one of those issues where you’ll have to rely partly on information and partly on intuition!
