Q1 2014 – Big Opportunity for Many
Has sufficient time passed to merit investing in funds clobbered during 2008? That’s the primary thought occurring to me when I read this Morningstar article. 5-year returns starting in Q1 2014 will be completely devoid of 2008 performance. I think this situation will be extremely important to asset managers. Many financial advisors are sensitive to negative returns in the 1, 3, or 5 year periods. By that first 2014 fact sheet, many funds will have no negative performing periods.
Implications? Asset managers already free and clear of negative performance and leading with that message need to evolve to something different. Early next year, only positive performance can’t be the primary selling message, as many funds will also have only positive performance. Second, asset managers with newly all positive performance should resist leading with performance for the same reason: it isn’t differentiated.
I’d recommend asset managers consider using the unique time period to communicate changes to risk management practices and/or the underlying investment process to protect investors from the next market downturn. Our FA research aligns with the answers from this RIA (Ignites: subscription required) from Wescott: communicating process and underlying portfolio changes trumps boasting about performance.