[long_equity_returns] [original_papers] [the_actuary] [Act_May_1991] [six_objections]

1  .Market values are not always well defined.
2.  For some classes of asset, such as gilts, if held to maturity, the figures are of no relevance whatsoever.
3.  Market value is subject to fluctuations, frequently severe, over short periods. Therefore, it is not at all appropriate to regard those values as any indicator of what might be described as a store of value. The conclusion must be that the market value contains virtually no useful information as a predictor of the all-important long-term future.
4.  High end-point market values lead to the apparent conclusion that the investment manager has done well. However, there are two points, the first being that further contributions will purchase less than previously, which is hardly optimal. Secondly, if the market value falls, then the investment return previously “disclosed” must have been too high, and hence an unreliable basis for taking decisions. Even if it increases, it is no more reliable, because the figure disclosed would have been too low.
5.  No account is taken of “risk”, which is difficult even to define, let alone to tackle.
6.  Finally, on a technical point, the “time-weighted return” commonly published is an artificial concept, and is not actually achieved on the fund.