Many investors are being kept in the dark about their portfolio’s performance, and could be losing out.

Despite periods of market volatility, 2010 was largely a good year for many investors. Equities continued to rebound strongly from the lows experienced in March 2009, providing increased levels of returns.

However, it wasn’t such good news for those invested in products which didn’t share in the stock market upturn. What’s even worse is that these investors may not even be aware that their investments under-performed. In the worst cases, they may not have received updates at all.
The performance of investment funds can be measured by ranking each fund against its Investment Management Association (IMA) sector peers. For example, if a sector has 100 funds, the funds ranked 1-50 are classed as above average; funds 51-100 below average. Yet when updating clients on their investment portfolio, many advisers fail to provide this context – leaving you unable to compare the level of return. You may be told, for example, your investment returned nine per cent last year, but have no way of quantifying if this is satisfactory or disappointing compared to how other funds performed.

The variation in returns from an above and below average fund can be staggering, especially over the long-term. According to Hindsight statistics, up to December 31, 2010, the difference in performance between an average top half-performing and an average bottom half-performing Cautious Managed sector fund was 15 per cent after three years – and an incredible 54 per cent after 10 years. If you had invested £50,000, the difference in returns could be £7,500 after three years and £27,000 after 10 years.

Or to put it another way, it could determine whether you achieve your objectives or are forced to settle for something less.

The global economic turbulence of recent years has underlined the importance of your financial adviser continually monitoring your investments, as the performance of funds can change. Take the highest-performing funds for each IMA sector five years ago (2006): at the end of 2010, an amazing 42 per cent have gone from very good to below average. Without taking action, such as reviewing your investments, your portfolio could suffer.

If you’re uncertain how well your investments are performing, the first step should be to contact your adviser to get an accurate picture. Your money – and your financial objectives – are too important to be compromised by a lack of information.