They exclude performance of other funds that have underperformed.
Open lots of funds. Some do well, some do poorly. Promote those that do well. Shut those that don’t. Reporting on only the winners is classic survivorship bias.
RG 53 specifically highlights this behaviour as being misleading, but it is arguable whether this interpretation is ever enforced.
Inconsistent treatment of fees.
There does not appear to be a firm standard in RG 53 for how fees should be reported. Whilst RG 53 says “The use of gross returns may be misleading”, this practice is only “discouraged” not outlawed. Returns should be reported “net of fees to the greatest extent practicable”.
Somewhat strangely, RG 53 then specifically gives managers the ability to report returns excluding certain fees, provided these undeducted fees are separately disclosed. E.g. “These returns are after deduction of ongoing fees. A 4% fee also applies to the initial investment.”
I’m no coding expert, but surely it can’t be that hard for ASIC to create a standardised template/widget for licenced fund managers to include on their website. This would show returns after all fees, both as a time series and for individual periods. It would also give investors the ability to input their preferred:
- Tax rate.
- Time period; and
- Choice of dollar weighted or time weighted returns.
More importantly, rather than simply drafting such guidelines, they might actually enforce them? Just a thought.