FROM THE EDITOR

OVER its 25 years, the annual Raging Bull Awards has built a reputation in the investment industry as a unique showcase for funds and asset managers that deliver consistently superior returns for investors, as well as being a way of simply rewarding top-performing fund managers for a job well done.

Two criticisms come up regarding the awards and I shall deal with each one in turn. The first revolves around the well-worn truism "past performance is no indicator of future performance". Should the awards be used by investors to guide them in their choice of funds?

My counter-arguments are that:

a) Reputation counts, because what else do you have to go on? This is the case when choosing a doctor, a plumber, or a mechanic for your car. Past performance establishes a service provider's reputation. New kids on the block may be just as good, if not better, but you don't know that until they have a history of performance on which you can make a judgement.

b) The awards are in two categories: for straight performance over three years and for risk-adjusted performance over five years. The risk-adjusted awards over five years, which is the more relevant category for investors deciding where to invest their money, take account of consistency of performance and the relative "smoothness" of the performance curve over a full five years, thereby giving investors a good idea of how well a fund manager balances risk and reward over a relatively long time frame.

The second criticism revolves around the human factor. The awards rate human performance; they are for actively managed funds. Passively managed index-tracking funds do not require much in the way of human intervention. There is no room here to get into the passive-versus-active debate. However, the bulk of investment assets in South Africa, and as far as I know in the US and Europe, remain in actively managed funds.

Until index trackers and artificial intelligence replace active management, error-prone humans will still be managing our money in the foreseeable future. So for the time being we can honour those who show themselves to be a cut above the rest.

Martin Hesse