Unit trust fund managers have been full of praise for the fact that you have remained invested in your funds during very volatile months last quarter. They say investors have learned that unit trusts are medium to long-term investments, where choice is not just a matter of chasing a recent top performing fund over a short period. Instead, it is better to be patient and to look for consistent performance. Today Personal Finance looks at the consistency of performance of unit trust funds and management companies for the period ended September 30, 1998. Esann de Kock reports.
BoE's Growth Fund in the general equity sector has done it again, with honours for consistency of performance over the one, three and five-year test periods of the Personal Finance/MoneyMate consistency of performance tables.
This is the third consecutive quarter that BoE has achieved this status.
The consistency of performance tables highlight good performance of individual unit trusts and their ability to maintain that performance.
The method for testing the consistency of funds was devised by Personal Finance and has been approved by the Association for Unit Trusts. The calculations were performed by Personal Finance's data suppliers, MoneyMate.
In first position over one year is Metlife's General Equity Fund; whereas the NIB Syfrets Prime Select Fund, which achieved first place over one year last quarter, has slipped into the number two slot over one year.
Investec's Equity Fund, number three over five years and second over three years, is down to number five position over one year - perhaps not a bad place to be, considering the volatile markets of the past months and the fact that Investec has made it clear that it believes in remaining fully invested as far as equity funds are concerned. This way, Investec says, you are under no illusion that when you invest in its equity funds, your fund manager is doing just that - investing your money in shares.
Another good consistent performance has been that of the Norwich General Equity Fund, which holds first position over five years, third position over three years and is in fourth place over one year.
How consistency is measured
A complex method is used to measure and establish consistency of performance of individual unit trust funds.
The performance of every qualifying fund is tested for a one-year, three-year and five-year performance. This is what happens in testing the three-year performance of general equity funds.
Step One:
At the end of each quarter (March, June, September and December), the performance of each general equity fund over the previous three years is compared.
Step Two:
All the general equity funds are ranked on their performance. The funds in the top one tenth of the rankings receive the most points and those in the bottom one tenth receive the least.
Step Three:
The points scored by each fund for that quarter and the previous 11 quarters are then totalled. This effectively means that the performance of a fund in this category is tested over six years.
With a one-year performance, instead of looking to see how the fund performed over the previous three years at the end of each quarter, we look at how it has performed over the past year and award points on the same basis. The same number of quarters (namely 12) are taken into account. This effectively means that the one-year performance test is carried out over four years.
With a five-year performance, again, the test is done every quarter for 12 quarters, meaning that the total judgment period is eight years.
* Note: Funds not listed in the table have not been in existence long enough to qualify for the judgment periods.