Call it “the Lehman Effect” or “the five-year witching hour,” but funds that suffered the most during the Great Recession are about to post stellar five-year returns — which they will no doubt be highlighting as net outflows for equity funds continue. According to a Wall Street Journal MarketWatch report, the average large cap growth fund, which had a 6.38% return entering September 2013, will post a 15.16% return by year end even if the markets remain flat. Other sectors like large cap core and financial services will fare even better.
Some may argue that it’s all relative, so good funds will fare better. Not really. Returns from funds that did well during the crisis five years ago will show less dramatic improvements. So be careful out there — it’s a dangerous world full of illusions, including the allure of past performance. Especially the five-year track record.
