Anyone who puts money into an investment fund wants to know how the value their investment is developing. Performance shows this development over a defined period time, expressed in per cent (%). It depends on the price development of the securities and the income received by the fund in the form of interest and dividends. Depending on how prices develop, it is also possible that losses will be incurred. Consequently, performance is not a fixed figure, like the interest rate on a savings account. This indicator is not only used to measure the result of an investment in absolute terms: it also allows for the comparison of different investments.
Performance presents the development of the capital invested in per cent. It always relates to a time period (e.g. one year, three years, five years). The starting level is always set at 100%. Performance is normally presented in three ways in Raiffeisen KAG’s product sheets on investment funds.
In a 5-year chart: In this case, the development is presented in a line chart.
By calendar years: In this case, the performance for individual years is determined and presented in a table or a bar chart.
In the form of an average annual yield (percentage yield p.a.) over a certain period of time. For example, the performance can be 3.5% p.a. since the fund inception date, but only amount to 0.9% for the last three years.
For some investment funds, performance is also compared against a benchmark, for instance to present it in comparison to the overall market.
How is performance measured?
Raiffeisen KAG calculates performance based on the published fund price, using the OeKB methodology.
According to this, certain individual costs which fundamentally have a negative impact on performance are not taken into consideration. For example, these include transaction fees, issue premiums, return fees if applicable, and securities account fees which are chargeable to the investor, as well as taxes.
Management fees (i.e. costs that the asset management company charges for fund management) are taken into consideration in performance.
Disbursements are considered to be immediately reinvested (non-dividend). Thus, the change in value is expressed in gross terms.
What you should pay particular attention to with performance
Performance presents a simplified picture, because it disregards risk. In order to obtain an overview of an investment fund, for instance of the risk-return profile, other indicators need to be considered (e.g. the Sharpe ratio, maximum drawdown, volatility [Link: Investment fund indicators you should know]).
Performance is based on data from the past. Past performance does not allow for reliable conclusions to be drawn in respect of the fund’s future development.
Performance only provides a useful basis for the comparison of funds which have a similar orientation and investment strategy. For example, comparing an equity fund to a bond fund is, as the old saying goes, like comparing apples to oranges.