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How to read a Fund fact sheet


How to read a Fund fact sheet

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“In the business world, the rearview mirror is always clearer than the windshield.” – Warren Buffet

In investing, it is said that past performance is not necessarily an indicator of future success. The irony is that the past is the best indicator that we can use. Most trust funds help you the investor choose a fund to invest in by providing a fund fact sheet. The fund fact sheet gives information about how a fund performed in the past. Caution should be placed since the past success doesn’t always imply future success. 

What to look at in the fund fact sheet

  1. Returns – the return is how much the fund has earned in a given period. There are two types of returns. Absolute Return is the fund’s return and Relative return is the return received compared to what the fund would achieve had it been invested in the same way as a recognised industry fund such as the JSE Top 40. For example if the funds absolute returns is 10% and the JSE Top 40 return is 8% then Relative return is 2% ( = 10% – 8%). The aim is to get a Relative Return greater than zero.
  2. Fees – fees are one of those costs that claw at your investment returns. It is important for one to know the fee structure of your fund because this affects your return. A good measure will be to have returns after deducting fees. This is called Net Returns after fees (=Absolute Returns – Fees). The types of fees that you may incur are management fees, fund performance fees, tax etc  
  3. Maximum drawdown – this is a good measure of a worst case scenario. If you have a maximum drawdown of -20%, this implies that if history repeats itself there could be a chance that you lose 20% of your investment.
  4. Number of Months with a positive return – this helps gauge how the returns were spread out. Returns are usually given as an average so the problem with this is that one month of high returns can significantly increase the average return. If this is so there is a high chance that this was a matter of luck. The higher the percentage number of months with positive returns the better.
  5. Volatility – measure how much returns can move in a given period. Most investors use this as a measure of risk. The lower the volatility the better the fund.



Tinaye is a self taught forex trader. He holds an honours degree in mathematics and is currently pursuing a Financial Risk Management (FRM) qualification.

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