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

Institute, Brandes, Death, Taxes and Short-Term Underperformance: International Funds (September 2014). Brandes Institute Research Paper No. 2014-07. Available at SSRN: or

Brandes Institute (Contact Author)

Brandes Investment Partners ( email )

11988 El Camino Real, Suite 500
P.O. Box 919048
San Diego, CA 92191-9048
United States

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