If you've heard it once, you've heard it a thousand times: Past performance does not guarantee future results. If you didn't believe it, new research from Segal Advisors Inc. might change your mind.
The New York-based investment consulting firm analyzed returns of 129 large-cap growth managers during the three-year periods at year-end 1999 and 2003 and found that 48% of those in the top quartile for the first period finished with negative returns of 12% to 16% for the 2001-2003 period. Only 9% of the bottom quartile managers in the 1997-1999 period had similarly negative returns for 2001-2003.
"In 1999, the managers who looked really hot were the aggressive growth momentum managers who were riding high in tech stocks and buying 20 or 30 momentum stocks," said Greg Moore, director of research at Segal. "When the downside came, those were the guys who got crushed."
He said managers in the third or fourth performance quartile at the end of 1999 were the more conservative ones who are outperforming today.