Real Money

"Investors RouteMap is so good, it is all I use to manage my own money" - Nick Dewhirst, founder

While we do not manage other people’s money, our CEO has relied on its recommendations exclusively for his own portfolio management. Over the five years ending 2008, his pension fund and ETF portfolio have beaten the vast majority of comparable publicly-available funds in the UK and US respectively, and over the past decade none have beaten the former. NB Actual performance is independently audited and after dealing costs.

This self-administered fund was set up in 1982, shortly after individual pension plans became available in the UK, and has been based on the same investment philosophy continuously, namely infrequent switches between specialist funds within a single family of funds.

Its performance was approximately average until Dewhirst left the City to set up Investors RouteMap in 1998. While the investment philosophy has not changed, it has become much more effective, outperforming substantially in two bull markets while performing averagely in two bear markets.

On balance that has generated substantial total returns over a decade when the average comparable publicly available fund has made little progress. In terms of relative performance, it has continued to out-perform through an wide range of different investment conditions, including technology and real estate bubbles, two global recessions and a boom in emerging markets and commodities.

A separate US ETF portfolio has produced similar results since it was set up in 2003, despite an entirely different structure, so this out-performance does not seem to be due to lucky selection of fund managers.

Please read the financial health warning

* Results audited
** Comparable Sources: M&G, TrustNet

Explanation

The left hand chart shows total returns after expenses in Stirling, while the right hand chart shows relative performance compared to two relevant benchmarks. The Managed Fund of the same provider is shown as the red series and the FTSE World Index is shown as the yellow series. In the total return chart the fund's setback in 2008 appears to be comparatively severe, but this is an optical illusion because it is three times the level of its benchmarks. As seen in the Relative Performance chart, its long-term trend of out-performance remains intact.

Discrete Performance

Sometimes a fund may have had a single exceptional year, which masks many average years. However this fund has had five years in which it has beaten its benchmarks by at least 15%.

In other cases, a fund may out-perform for several years, because its investing style is fashionable, but this seldom continues for more than a few years. However this fund has continued to out-perform, despite the change in fashion from growth to value investing.

The compounding effect means that over a decade it has out-performed all the comparable publicly-available funds. 10 year CAGR to December 2008 is 11.8% p.a. compared to 6.1% for the best Flexible Managed Pension ranked by Morningstar.

As this period includes the most severe global stock market setback on record, the performance does not seem to be due to a bias towards higher risk investments.

Explanation

This chart uses the FSA recommended approach for displaying consistency of performance by breaking out results for discrete annual periods. The personal pension is compared with two relevant benchmarks - the M&G Managed Pension fund, which has the same range of investment alternatives and the IMA Managed unit trust sector as a whole.

Percentile Rank

Publicly-available Balanced Managed Pension funds may be considered not strictly comparable because the category is constrained in its stock / bond asset allocation. However they are the only basis for which comparable data is available.

On the other hand, the personal pension has been restricted within one family of funds, rather than free to choose between any funds from any provider or indeed make any direct investments in stocks or bonds anywhere in the world.

The unconstrained personal pension might be expected to perform better in bull markets and worse in bear markets, but that has not been the case. Irrespective of whether the rolling five-year performance ended at a market peak or trough, the bar chart below shows that few have beaten it at any stage.

Performance is scalable - directly because the personal pension invests solely in publicly-available funds invests and indirectly because these closely track the performance of broad market indices. That applies equally to the ETF Portfolio.

Of course, performance could collapse tomorrow, but the chances of it being due to luck decline the longer it goes on.

Proportion of publicly-available managed pension funds that have performed better

Explanation

This chart shows long-term performance rank by percentile. That is to say that 1% means it performed better than 99% of the closest comparable publicly available funds over the previous five years. Therefore by September 2008, all the data shown as at September 2003 will have dropped out. The sample has grown to exceed 600 publicly available funds.