Long Term Performance2009 was our 21st year of portfolio performance and as normal we update the track record – limited value that may be for those of you wondering what comes next! Don’t forget the cliché - past performance is no indicator of the future. It remains true, especially about short term performance.
A $1,000 investment in 1989 in the average GMI growth portfolio has, over the following 21 years, compounded to $5,516 compared to the return one would have received if invested in the world sharemarket where that $1,000 would now be worth $1,844 (both in NZ dollars). Over this particular period that’s an average return after fees, brokerage and tax of 8.5% per annum compared to the relevant market benchmark return of 3.0% per annum. It has not been an auspicious 21 years for sharemarkets has it? The travails of the 2000-2002 tech crash and the 2007-9 credit crunch have just smashed total performance over that period. The next graph gives the year-by-year performance of those growth portfolios and contrasts it with the benchmark, MSCI (Morgan Stanley Capital Index or world sharemarket average) performance. It is evident that out-performance has come as much from minimising the damage in down years as scoring the occasional out-performance in the up-years. This was especially evident during the 2000-2002 market meltdown, and again over the 2007-2009 credit crisis.
Still, as the graph illustrates over the 21 years our growth portfolios have outperformed the benchmark for 15 of them and it’s apparent from the record to date that where we get the most problems in maintaining an edge is when the market goes up on a tear. This is because we’re never 100% invested as a matter of policy and we include absolute return funds in our growth portfolios and expect them to deliver out-performance when the market gets sad. So far, in the market slumps of 1990, 1994, 2000-2002 and 2007-2009 this strategy has paid off very well.
Of course the standard disclaimer applies - past returns provide no indication of the future. |