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Hewison Private Wealth - Insights
Hewison Insights

How much do your investment returns matter?

Andrew Hewison
Managing Director
8 Aug 2022

Your FY22 investment returns are in, but do they really matter?  Yes, but not as much as you think… 

The media gets overly hysterical reporting the previous 12 month returns of super funds and fund providers. Similarly, clients can get fixated on their 12-month portfolio returns. 

Here are the top 3 reasons you should largely ignore them –


 1. One year returns are largely irrelevant.  

  • Very few clients are looking to move their investment/portfolio manager every 12 months. 
  • Unless you are trading (gambling?), it should be more about the longer-term performance of your portfolio, as it relates to your objectives. 
  • Skip the 1-year return tab and click the 3 & 5 year (everyone is entitled to an off year, so long as their long-term track record is intact).


2. It’s less about returns, and more about your objectives.

  • Different strokes for different folks. Performance means very different things to different people. For some it’s beating an index, for others capital protection and certainty of cash flow is the priority. 
  • Reviewing your objectives is a conversation to be had with your adviser at your annual review. That said, I would still encourage you to talk long term. 
  • While it generates headlines to publicize the financial year returns of investment managers, it’s a very fixed, point in time. It is easy to pick a short period of history and focus on good, or bad returns. These periods can be cherry picked to suit someone’s agenda one way or another. Therefore; extending the review period provides better data.


3. Not all investments are re-valued each year.

  • Unfortunately, it’s a known practice of fund managers, particularly superannuation managers, to only re-value unlisted assets if they are known to contribute a positive return. This is possible when the fund itself owns 1005 of the asset. Therefore; short term returns can be manipulated. 
  • Alternatively, often assets, such as large commercial assets, can hold positive capital returns, but are not regularly re-valued by external managers, which can understate portfolio returns.  


Whilst annual reviews are important for many reasons, I recommend that you review portfolio performance in 3-5 year blocks. If nothing more than a box ticking exercise, you can at least say that you’ve done your due diligence to ensure your overall objectives are being met.