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Fund performance measures should be over at least three years
Actuarial research house Rice Warner has declared that superannuation fund performance comparisons over periods of less than three years are likely to be misleading.
In an analysis published this week, Rice Warner said funds should be telling their members that they have a time horizon of 10 years and then show results against that timeframe.
“Shorter periods will be subject to higher volatility and could deceive members because of the variability of smoothing results,” the analysis said.
It said in an ideal world, funds, regulators, researchers and the media would focus on three to five-year returns and leave shorter-term results for internal analysis by funds.
Publicity about short-term returns can lead members to switch funds or investment strategies in the pursuit of investment performance based on inadequate information, the analysis said.
“Funds with large proportions of unlisted assets will, out of necessity, experience delays in bringing adjustments in the value of these assets to account in unit prices and published performance,” it said. “They should provide some guidance to their members and potential new entrants as to the impact of these delays on investment results over the next reporting period.”
AUTHOR
Mike Taylor
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