How to assess fund performance

Most fund managers, Artemis included, ask investors to judge the performance of their funds over the long term, by which they typically mean at least a five-year period.

Funds are designed to be long-term investments. Investing in shares in particular involves a significant amount of risk, so investors have to expect ups and downs – ‘volatility’ – along the way.

Funds will show you performance for a minimum of five years on websites and factsheets, or for as long as the fund has existed, at least after its first year of existence.

Long-term nature of investing

As above, when a fund manager invests in the shares or bonds of a company, they will typically do so for the ‘long-term’, which usually means five years or more.

Long term can be different for different people: for example, for a 25-year-old, it might mean 30 or more years until they retire; for a person nearing retirement or recently retired, it might mean 10 years.

By investing for the long term, fund managers believe it is the best way to achieve the investment potential (‘upside’) of a company’s shares or bonds.

If an investor is investing for the long-term, they should view this as being for a minimum of five years to align with the way the fund manager invests.

Short-term volatility

Short-term volatility refers to the movement up or down of the value of an investment, as measured over a short period of time, which could range from a single day to a week, month, year or several years

Volatility derives from changes in, for example, the share prices of companies that a fund invests in. Increases or decreases in share prices is entirely to be expected – companies are affected by many factors, some within their control (for example good or bad management, opening or closing of stores, development or cessation of different products), and some not in their control (for example, changes in customer demand, competition from other companies in the same industry, changes in countries’ economies, recessions, wars).

When companies’ share prices go up or down, so does the value of the investment funds that invest in those shares.

Investing for the long-term means that short-term ‘bumps’ in investment values will typically be smoothed-out over that longer period of time (although this is not guaranteed).

Benchmark comparators

• In general terms, a benchmark is a standard against which something can be compared.
• In the investment world, a benchmark gives investors a way of comparing the performance of a fund with a recognised, independent comparator that is aligned with the investment objective of the fund.
• Most Artemis’ funds use two benchmarks – an appropriate ‘index’ (for example, the FTSE 100 index or the US S&P 500) and their relevant ‘sector’ average (sectors being groups of funds from other fund managers with similar investment objectives). For information on what benchmarks are used by each fund, see their Key Investor Information Document (KIID).

For further information, read the Benchmarks section.

What to do when values drop quickly

The value of an investment may drop quickly for a variety of reasons, as indicated above.

The first thing to do is not panic!

Secondly, look at the reason or reasons why an investment has dropped. It could be because of something going in world politics, such as the invasion of Ukraine. It could be because of an issue related to one of an investment fund’s investments; for example an individual company may have reported disappointing results. It could be because of a change in currency exchange rates or the price of a commodity like oil or gas.

If you are worried when values drop quickly, take financial advice from a financial adviser if you have one, or look to our website for information. Not all market events affect every investment the same way. When a value drops quickly it may only be for a few hours or a few days, and it is important to remember over what time horizon you originally invested. If you invested for the long term, then short-term drops are to be expected.

This information is intended to provide you with help and guidance about investing generally and about investing with Artemis. It is not a marketing communication and should not be used to make investment decisions. You should always refer to the relevant fund prospectus and KIID/KID before making any final investment decisions.

Artemis does not provide investment advice on the advantages or suitability of its products and no information provided should be viewed in this way. Should you be unsure about the suitability of an investment, you should consult a suitably qualified professional adviser.