New research confirms old adage on investment funds

Past investment performance is no guide to future performance, according to research published this week by the British Financial Services Authority (FSA).

The latest research confirms previous findings by the FSA, published earlier this year, that there is no correlation between how a fund has performed in the past and how it will perform in the future.

The FSA's research will come as a blow to the thousands of investors who regularly pore over performance tables in the hope of spotting a future winner.

Mr Mark Rhodes, author of the latest research paper, said: "There is a large and growing body of research, both here and in the US, which demonstrates that information on past investment performance would not, in general, be useful to retail investors.

"A number of researchers have examined whether past performance repeats.

"The evidence is that repeat performance, where there is any, is small and short-lived and is most likely to occur in smaller, poorly-performing funds.

"In practical terms, this means that investors would not find it useful to examine funds' past performance in making investment decisions. It also supports the FSA's indication that its Comparative Information Tables should not include details of past performance."

The tables will draw together information about financial products in Britain such as personal pensions and Individual Savings Accounts, but will not include performance.

They are due to be published in mid-2001.

However, a number of organisations, such as MoneyFacts, produce performance tables on a range of financial products for a large following of investors.

They, not surprisingly, believe there is definitely some point in assessing past performance.

A spokeswoman for Life & Pensions MoneyFacts said she was dismayed at the FSA's decision not to include past performance in its comparative tables.

Ms Sylvia Waycot, editor of Life & Pensions MoneyFacts, said: "By removing past performance from the selection criteria, we are aligning the potential of picking a successful fund with that of shutting your eyes and using a pin."