It depends who you are and what you're looking for.
If you're the fund manager, owner, or an individual investor, then compound return absolutely matters. You want the most amount of money at the end of the time period, and you've already committed your capital.
But if you're a retail investor trying to decide where you want to put your capital - which, presumably, is who this article is aimed at - what you're looking for is whether the fund in question will outperform your alternatives. What this article is saying is "past performance is no guarantee of future results", i.e. you do just as well putting your money in an index fund or investing via a dartboard as you would picking the top-ranked fund in last year's returns.
You don't get to travel back in time 5 years to make your investment decisions, so compound returns in the past are immaterial to you. You want the highest compound returns in the future, which on average come from passively investing in the indexes.
The problem is that the article does not make that link. Because a manager does not remain in the top quartile of his/her PEERS does not mean they necessarily under performed the index...
You don't get to travel back in time 5 years to make your investment decisions, so compound returns in the past are immaterial to you. You want the highest compound returns in the future, which on average come from passively investing in the indexes.
1. This is an article of faith.
2. "On average" doesn't matter. How much effort is required to stay away from the low end of that average is what matters.
If you're the fund manager, owner, or an individual investor, then compound return absolutely matters. You want the most amount of money at the end of the time period, and you've already committed your capital.
But if you're a retail investor trying to decide where you want to put your capital - which, presumably, is who this article is aimed at - what you're looking for is whether the fund in question will outperform your alternatives. What this article is saying is "past performance is no guarantee of future results", i.e. you do just as well putting your money in an index fund or investing via a dartboard as you would picking the top-ranked fund in last year's returns.
You don't get to travel back in time 5 years to make your investment decisions, so compound returns in the past are immaterial to you. You want the highest compound returns in the future, which on average come from passively investing in the indexes.