Share portfolio (back testing) performance comparisons

PMX generally does not provide backtests on current share portfolios because, in most cases, they are highly assumption-driven and can therefore be misleading.

Where we are reviewing a portfolio as it stands today, we typically do not have full visibility into its historical holdings, transaction activity, rebalancing decisions, cashflows, or the treatment of corporate actions over time. Any backward-looking performance analysis would therefore require us to assume that the portfolio’s current structure existed throughout the full period, which is unlikely to reflect the client’s actual investment journey.

This is particularly problematic where some of the instruments currently held were only added more recently, often after a period of strong performance. A backtest that assumes those holdings were in place from inception can materially overstate past returns and make the current portfolio appear more attractive than it would have been in reality.

These exercises also usually exclude important real-world costs such as platform fees, advice fees, trading costs, and other implementation frictions. As a result, the outcome is often gross of costs and not directly comparable to a professionally managed portfolio assessed on a net-of-fees basis.

For a backtest to be meaningful, we would need a complete history of holdings, trades, contributions, withdrawals, rebalancing activity, and corporate actions. In most cases, this is not available, and attempting to reconstruct it would be both highly time-intensive and inherently unreliable. 

For that reason, PMX focuses on the areas that are more relevant to sound decision-making: portfolio construction, diversification, concentration risk, position sizing, implementation efficiency, and suitability for the client’s long-term objectives.

We are happy to assist with an analysis of the portfolio’s current structure, exposures, and risk characteristics, and to compare that with our portfolio construction approach. However, we do not provide backtested portfolio performance where the result would depend on assumptions that may misrepresent the client’s actual experience.