Returns-chasing investors value top-performing funds and prioritise them for their investment allocations. But what does ‘top-performing’ actually mean? The naïve answer is that this is self-evident – the funds with the highest rolling returns over a given period – but this concept is quite misleading.
Because investors are all targeting a different future point at which their accumulated funds will be converted into cash and redeemed from the fund, commentating on which fund is ‘ahead’ at a given month, quarter or year-end is of limited relevance, unless that date coincides with an investor closing out their investment. At that point, the investor could assess whether they had chosen wisely or otherwise.