It is seen as boiler-plate legalese that no-one really takes seriously. This is for good reason, as past performance is one of the few tools we have for assessing how a fund may perform. In some ways we at FE could be viewed as an enabler of this behaviour; a table that colour-codes funds by quartile using three-year performance figures is one of the most popular features in our fund analysis tools.
However, one cannot rely solely on this as a means of constructing their portfolio.
This bad habit is causing something of a concentration in the industry, with a few preferred funds now growing to epic proportions, not solely based on the last three years, but definitely in part due to their sterling reputations.
Picking "good funds" however, could be leaving investors with a dangerous lack of diversification.
A portfolio containing Invesco Perpetual High Income, M&G Corporate Bond and First State Asia Pacific Leaders would seem relatively diverse on the face of it.
However, with the continuing integration of global capital markets, asset classes such as UK equities, corporate bonds and emerging markets are increasingly interconnected and events in one market have a knock-on effect in others.
This is unavoidable to some extent but there is a lot more that could be done to offset this risk.
Diversifying across asset classes is no longer enough, instead it is now important to diversify across investment styles as well.
The last five years have been particularly trying for fund managers, and a few small rallies aside, the overwhelming winners from this period have been funds with cautious, defensive investment strategies.
Naturally these are the funds that stand out when looking at past performance.
While it seems counterintuitive to deliberately pick funds that have done poorly, there is a lot of merit in the approach.
Growth strategies and aggressive funds in highly cyclical stocks will not be looking too appealing at the moment, but including them in a portfolio adds an important extra dimension.
These types of funds will typically be in different sectors and companies to those that top the performance tables over three and five years.
They therefore avoid potentially dangerous over-exposure to popular defensive areas such as utilities and tobacco, and also ensure your portfolio is not left behind if there is a sustained market recovery.
Past performance still has a role to play in identifying which underperforming funds are worth considering, however.
Studying how funds have done in both rising and falling markets can help differentiate between funds that are not suited to current market conditions and ones that are just poorly run.
Performance of funds over 5-yrs
Source: FE Analytics
Funds such as JPM UK Dynamic, which had a good track record in the boom years prior to the credit crunch and had a brief return to form in the relatively benign year of 2010, is currently languishing in the fourth quartile and is not one that would usually be topping many people's watch-lists, but is probably worth investigating further.
Likewise, the Cavendish Asia Pacific fund is often undervalued, even by Cavendish, because the fund's short-term returns have suffered from its aggressive positioning.
However its exposure towards economically smaller countries such as the Philippines and Indonesia offers welcome relief to the heavy concentration of China in most Asian funds.
Performance of funds over 3-yrs
Source: FE Analytics
While being a cliché, the ubiquitous small print still offers good advice, as recent past performance alone is not enough.
Past performance in different market conditions, however, can offer a useful insight and help investors weatherproof their portfolios against a much wider range of potential future scenarios.
Rob Gleeson is head of research at FE. the views expressed here are his own.