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  1. #1

    Back-tested performance – often misleading, but not off-limits with precautions

    In separate actions against a Massachusetts-based exchange-traded funds investment manager, the SEC warned advisers to be careful if they advertise their performance, and to pay particular attention to the distinctions between true actual performance, model performance and back-tested performance.

  2. #2

    Back-tested performance – often misleading, but not off-limits with precautions

    Both actions were filed on December 22 against F-Squared Investments and its former CEO, with the firm settling for $35 million in disgorgement and penalties and the case against the former CEO just getting underway in U.S. District Court.

  3. #3

    Back-tested performance – often misleading, but not off-limits with precautions

    The settlement against the firm included a rare admission of guilt,. Both both cases centered around the veracity of F-Squared’s advertising performance claims of its index product, AlphaSector, the investments of which could be rebalanced periodically based on buy-sell signals from an algorithm.

  4. #4
    content from reference site

  5. #5

    Back-tested performance – often misleading, but not off-limits with precautions

    The SEC said the firm and its former CEO, Howard Present, “defrauded investors through false performance advertising about its flagship product.” The advertising performance claims in question occurred during a five-year period, from September 2008 to September 2013.

  6. #6

    Back-tested performance – often misleading, but not off-limits with precautions

    “F-Squared falsely advertised a successful seven-year track record for the investment strategy based on the actual performance of real investments for real clients,” the SEC said. “In reality, the algorithm was not even in existence during the seven years of purported performance success.”

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