The Factsheet Tricks, 6 of 10
The private test run
Track records that began privately, where only the successful ones went public.
What it is
A fund can be run privately for a while ("incubated") before it is offered to the public. If only the ones that did well are launched, the early record that appears in the marketing was selected for being good.
Why it works
- Funds tested privately before launch showed extra performance that disappeared once they opened to the public, which can flatter a track record.E11
Illustration, not a real fund
Sharpe ratio of 0.64
Based on 30 months. The library labels it low confidence, and estimates about 81 months of history would be needed before the score says much.
Synthetic sample fund, Jul 2022 to Dec 2024. Figures computed by the openfactsheet library.
How to spot it
- Ask when the fund opened to the public, and whether any of the record is from before that date.
- Give a short record less weight than a long one.
What OpenFactsheet does
Labels every figure with how far it can be trusted, and shows how much more history would be needed before a score means much.
Sources
- E11 Evans, R.B. (2010). "Mutual Fund Incubation." Journal of Finance 65(4), 1581–1611.
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