Can you compare the past performance of tracker funds?

09 July 2020

Question by Vivienne

Hi, I'm trying to choose an 80/20 low cost tracker fund to transfer my pension to, as I'm currently paying 1% fees to my provider which I want to save on. Does the performance of different tracker funds vary a lot (e.g. between PensionBee, Nutmeg, AJ Bell) and how do I compare their track records? Many thanks, Vivienne

Answered by Holly Mackay

Hi Vivienne,

Thanks for your question. The short answer to your first question about PensionBee, Nutmeg; AJ Bell Youinvest - is yes, the performance between the various investment solutions you name does vary quite a lot.

In theory the very definition of a tracker fund is that it mirrors an index. So for retail investors, anything tracking the FTSE 100 for example will basically return you the same. That's the theory.

In reality, the sorts of options you mention will typically offer about five choices, which will differ in volatility and the percentage of shares in the portfolios. However, one provider's most volatile portfolio might have 95% of shares in it for example, while another provider's might have 80%. So it can be very difficult to compare like with like.

The other thing is that even if you compare two investment portfolios which both have 80% in shares, the underlying geographies will probably be different. We've seen examples over the last few years where groups have taken very different positions on US equities and have consequently had very different results.

These sorts of ready made investment options are relatively new in the market and very few have meaningful track records yet. A track record of less than a year is monkey and a dart board kind of stuff. I think you really need to see a track record of five years to evidence skill over luck, and none of these guys really have these long track records.

So, the long answer is that it is very hard to make a decision about these providers on an informed and reliable performance basis.

I would use our Compare pages to help you identify two or three you like the look of, and then visit their sites to see what the precise make up of their 80/20 portfolios is - and go from there.

Good luck and I'm sorry I don't have a more concrete answer!


Answered by

Holly Mackay

Founder and CEO of Boring Money

I’ve worked in investment markets for over 20 years. I started out at Merrill Lynch Investment Management and worked at a few big names before setting up my first business in 2008.