Death, Taxes and Short-Term Underperformance: International Funds
5 Pages Posted: 28 Oct 2015
Date Written: September 2014
“In this world nothing can be said to be certain, except death and taxes.” — Benjamin Franklin
The Brandes Institute has added a third inevitability to Ben Franklin’s famous quip about life’s certainties: short-term underperformance among active managers. Over the years, Institute research has shown active managers, even the best-performing ones, suffered periods of weak returns relative to benchmarks and their peers. But underperformance, up to three years, had relatively little impact on the best-performing funds’ ability to deliver success over 15 years.
It may prove short-sighted to fire good managers when they inevitably underperform. Instead, consider other vital factors when evaluating managers — such as investment philosophy, process, organizational culture and alignment with client interests — to help discern weak short-term returns from other, more serious problems.
The original Death, Taxes and Short-Term Underperformance studies examined short- and long-term returns for U.S. and fixed-income mutual funds. We extended the study to international funds and found the same patterns of short-term underperformance for the best-performing funds.
Investigating Short-Term Underperformance in International Markets • Identify the top long-term performers • Reveal their short-term challenges along the way
Keywords: international funds, short-term underperformance, active manager
JEL Classification: G11, G22, G23, G31, G10, G14, G20, G30
Suggested Citation: Suggested Citation