Evaluating Fund Performance: Identifying and Removing Underperformers

Once you have completed the annual review of your portfolio’s asset allocation and assessed whether rebalancing is required, the next step is to evaluate fund performance. Category average returns often conceal sharp variations in returns within a fund category. In the large-cap space, for instance, while the category average return over the past year is 3.8 per cent, the best-performing fund has delivered 9.6 per cent, while the worst has returned –6.4 per cent. Such divergence underscores the need to periodically identify and remove laggards from the portfolio.Fund against benchmarkBegin by assessing how a fund has performed against