Best Performing Irish Pension

Dave Vanian said:

And how would you benchmark a fund (like the majority of multi-asset managed funds) that have shifting mix of asset classes within the fund?

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Why not just compare the fund's return to the SP500 or the MSCI world index or the Wilshire 5000 or even a range of indices? The fact that there is a mix of asset classes within the fund does not preclude the comparison with an index - at the end it's an investment vehicle and I want to have some idea of how my investment is performing vs. a base investment option. The comparison could have some explanation to explain under-performance (e.g. a low-risk fund that is weighted towards bonds/cash to avoid volatility will naturally not achieve the same return as an all-equity fund in buoyant markets but should protect capital in a down-turn). From my perspective I would like to see that the fund is doing what it purports to do - i.e. if I am very risk-averse it has grown slowly over time and protected my investment even when the index has dropped or on the other end of the risk scale that I am consistently doing better than the index (do let me know if you see one of those )

bankrupt said:

Why not just compare the fund's return to the SP500 or the MSCI world index or the Wilshire 5000 or even a range of indices?

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You can compare the fund's performance with whatever you want; the major index providers all publish performance figures.

You don't need any regulatory changes to do this.

@Ndiddy & @bankrupt

I can easily chart the past performance of any Irish Managed Fund against an index like MSCI World. A typical Managed Fund contains equities, bonds, property, cash and perhaps some alternatives. The MSCI World is an index containing equities only.

During years when the MSCI dropped because global equity values dropped, my typical Managed Fund dropped by less because of the diversifying assets. During years when global equities rose in value, my typical Managed Fund rose by less for the same reason. That's as it should be.

I can quantify the extent by which diversifying assets protected investors against equity market falls and diluted equity market gains. So what? Why is that useful? An index of just equities and a fund containing many different asset types will always perform differently so what's the benefit of comparing them? Apples and oranges. I can add a comparison with the value of my house over the same period. It performed differently to both the Managed Fund and the MSCI World Index. While it might be an interesting comparison, it wouldn't tell me much of real use as again it's a different asset type.

Such a comparison (with an equity index) would only be of value if your own personal risk appetite has you investing in an all-equity global fund. Then the comparison with an all-equity global index like the MSCI World would be valid and useful.

Do we have some level of consensus perhaps? Comparing a mixed-asset fund to an Index is possible but you have to do it yourself and it may also require some additional interpretation to account for the risk protections intended to be part of a well managed active fund.

If you recall where this thread started, Brendan said:

I had a quick look and they don't seem to compare them with index tracking funds.
That should be the real comparison.

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That comment was the reason for my question as to whether there was merit in mandating that funds publish this comparison as I still believe it is a reasonable way to have an idea of the performance of an investment.

There is a plethora of research on whether or not actively managed funds manage to out-perform the index in general and we all know what that research says. I am quite sure that Irish funds have no desire to publish a comparison of their active-fund performance and I doubt that reluctance has much to do with the complexity of explaining risk.

bankrupt said:

There is a plethora of research on whether or not actively managed funds manage to out-perform the index in general and we all know what that research says.

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We seem to be back to this vague concept of The Index as if there is only one. There are as many indices out there as there are markets. If you think that there is value in comparing a fund that invests in a mixture of assets with an index comprising, say, global equities only, then the information is already out there in the public domain. Comparing the performance of two different asset classes is of little value. Why not compare a multi-asset fund with the performance of the spot gold price? Apples and oranges.

As I said before, studies have shown that the average actively-managed fund will underperform an index, if the fund is being compared to an appropriate index of the same asset class. Like any average, some actively-managed funds will outperform the appropriate index, but it's not possible to definitively predict in advance which actively-managed funds will be the ones to outperform.

bankrupt said:

I am quite sure that Irish funds have no desire to publish a comparison of their active-fund performance and I doubt that reluctance has much to do with the complexity of explaining risk.

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Past performance of any of the Irish fund managers' funds is readily available on their respective websites. Understandably, they don't compare their multi-asset funds with indices of different assets as that wouldn't be a valid comparison. But if you want to run your own comparison with any index of any asset class you like, all the data to do so is readily available online.

bankrupt said:

Comparing a mixed-asset fund to an Index is possible

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It's possible but meaningless.

Would you compare the performance of an active bond fund with an equity index? Of course you wouldn't - you would be comparing apples and oranges.

And yet you want to compare the performance of a dynamic, multi-asset fund with the performance of an equity index chosen at random. Surely you can see why that would not be an appropriate comparison?

Why not simply invest in an index fund (or a basket of index funds)? Then you can then appropriately compare the performance of the fund with the index it is purporting to track.

Dave Vanian said:

We seem to be back to this vague concept of The Index as if there is only one.

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This is a fair point and Sarenco makes much the same "Would you compare the performance of an active bond fund with an equity index?"

Rather than only imagining cases where there is a huge divergence in the types of asset being compared, how about funds being required to show a performance comparison vs. a relevant index (or range of indices - no need for it to just be one)? It should not be difficult to define a set of indices that could be selected from for this purpose.

Sarenco said:

Why not simply invest in an index fund (or a basket of index funds)? Then you can then appropriately compare the performance of the fund with the index it is purporting to track.

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Yes indeed, I would hope that people would eventually do that by default, however for some unknown reason expensive actively managed funds stubbornly survive. I can only assume that is because there is not a general awareness of the merits of active-management vs. passive index tracking - hence my question about how we might highlight the difference.

Interesting thread.

Just goes to show how difficult it is for most people to plan their retirement.

There seems to be no simple (ie clear, unbiased) comparison between pension plans.

If you search the web for best performing irish pensions, you get results which have been heavily criticised in this thread (with good reason)

The 'best' ones on the results come from financial advisors and currently show Merrion Investment and Zurich Life Perf Pension with highest growth over periods up to 10 years.

As past performance is no indication of future performance, can anyone suggest which factors would be most appropriate to use to compare pension plans, taking into account the fact that its quite difficult to compare charges ?

I feel the introduction of multi asset funds and ESMA ratings has further confused people

As some posts have already outlined you should ignore past performance, it is more important to understand the mandate of the fund. Merrion and Zurich may have been the best performers over the last then year but this is primarily because of "growth" style and their exposure to Tech stocks which are significantly outperformed the market.

Who knows what will happen in the next ten years so my advise ( disclaimer - i'm not an authorised advisor) is to buy a global equity fund as cheap as you can. I can understand the mandate of a global equity fund ,whereas all Multi assets funds seem to have multiple asset types and impossible to compare and providers seem to more concerned with keeping you within an ESMA rating as opposed to providing a return

Just realised I replied to a post from years ago....