Moving the Goalposts

Today's chart appears in a research paper titled, “Moving the Goalposts? Mutual Fund Benchmark Changes and Performance Manipulation” which was referenced in an article from the Wall Street Journal the week of August 22. The paper denotes that 37% of all actively managed mutual fund managers changed their benchmarks between 2006 and 2018, and two-thirds of these changes made the funds appear to improve their performance.

The chart shows that these changes made mutual funds go from losing assets to attracting assets resulting in investors incorrectly assuming that they will perform better. When looking at research, chances are they will not.

Jason Zweig of the Wall Street Journal provided a great reminder, “Prospectuses always warn that past performance is no guarantee of future results. Turns out it’s no guarantee of past results, either.”