Mutual Fund Performance – A Case Study

As a professional investor, I’ve read quite a few annual reports. If you include quarterly reports, they number well over ten thousand. Early in my career this activity was limited to reports from companies, but now I research mutual funds of all types too. One section you see in every fund report is a discussion about past performance. While “past performance is no guarantee of future results” as the boilerplate legal language says, it can give you clues as to how a fund invests. Past performance should also raise certain questions in every portfolio manager’s mind. Namely, why do we own (or want to own) this fund?