How to talk about good and bad fund performance
Past performance is no guarantee of future results, good or bad.
In the fund business, we know that disclaimer well. It's a culture of compliance, yes. It's also true.
Past performance typically has periods of out performance and under performance. Good and bad (like life). It's not a guarantee. If you underperformed, it doesn't mean you always will. Just like if you outperformed, it doesn't mean you always will. But your track does say something.
Numbers can tell powerful stories; let’s unlock them.
Good performance
Restate it vis a vis benchmarks and peers in simple terms: absolute, or relative outperformance (by x) or quartiles (x percentile)
Illustrate how the win is an example of your broader philosophy
Relate it to process… our process is a, b, c which led us to do x, y, z. Not just how you sourced the position, but how did you exit.
If applicable, how the process worked (again)
Bad performance
Restate it, we lagged by x or we had a drawdown of y. Own it. Don't start hedging and hemming and hawing.
Explain what happened - honest and candid - relate it to process. What broke down? What did you do then and there to stem the loss / volatility?
Then, what did you do about it for the future? How did you evolve your process and risk management as a result?
If applicable, example of how that process evolution worked to mitigate risk or loss
“In a nutshell, past performance does matter. When you talk about the highs and lows, tie ‘em to process.”
