The preference for a 3 year performance track record is generally applied at the fund level. Fund managers should preferably show a minimum track record so that they can be better assessed on their ability whether they are able to give consistently good performance against the benchmark for the specific fund they manage.

 

In the case of indexed funds or Exchange Traded Funds, the 3 year track record is applied differently. The focus will be on the fund management company's technology or systems and processes that they have established to perform the rebalancing functions to track indexes closely¹ and their ability to consistently maintain a low cost structure for the index funds they have under management.

¹Low tracking error