It is also interesting to note that the performance of an active manager significantly improves as we increase the investment horizon.
Over the past 10 years, 51.70 per cent of the funds in the IA have produced a positive information ratio, while this number decreases to 33.62 and 26.07 per cent over the past five and three years respectively.
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There is a clear trend that cannot be ignored. Investors should focus and decide on fund selection at the beginning of the investment process and should probably hold their investments over a long time. Frequent fund turnover might cause more harm than expected.
Charles Younes is research manager at FE
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