Jeffrey Ptak from M* performed an interesting study which
appears to contradictthe common belief that past fund performance can not effectively predict future performance.
"In summary, even if you ignored fees and chose funds based on their past pre-fee performance,
you still tended to do better *after* fee over subsequent periods.""We can get into the hows and whys in a different post, but pre-fee past performance
did a very good job of predicting funds’ subsequent performance, on average,
over the past few decades, almost no matter which way you looked at it."https://jeffreyptak.substack.com/p/whats-predicted-funds-performance
Comments
I always wonder why these looks in the rear-view mirror always end at some year. Why not go all the way back to where ever the data begins?
I don't subscribe. Was there ever a follow up post on whys?
Also, kind of surprised this wasn't published at M*.
https://www.morningstar.com/funds/what-has-predicted-funds-performance-thing-that-wasnt-supposed-work
So, in summary, past pre-fee returns seemed to forecast future pre-fee returns,
and expense ratios were a strong predictor of subsequent net returns.
What if you were to combine the two by grouping funds based both on their past
pre-fee performance and their cost?
https://www.morningstar.com/funds/what-worked-fund-investors-pinching-pennies-letting-winners-run
I wonder if he looked at turnover ratios at all.
https://www.morningstar.com/people/jeffrey-ptak