Back-Tests of Our Approach

Because our approach is wholly systematic, it is possible to test how our current portfolios would have behaved historically. Tests of this kind are far from a perfect guide to the future, but they do illustrate why we believe in our index tracking portfolios. In this test, our low-cost, index-tracking portfolios do better than the average of traditional investment managers (realistic fees have been deducted from the returns).

It is worth noting that all the lines on the chart have a similar shape. This illustrates another important aspect of our approach. We are not trying to ‘shoot the lights out’ by taking large bets or being hugely different from the market. Rather, we aim to add incremental value above the general market, over the medium to long term.

Notes and Sources