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Half of ‘buy list’ funds underperform


Half of funds included on buy lists on direct-to-consumer platforms have underperformed compared to their sector average over five years, research has found.

The Financial Times cites a study by consumer finance website Boring Money which looked the 29 most popular funds included on buy lists on the likes of Hargreaves Lansdown, Barclays Stockbrokers, TD Direct and Fidelity Personal Investing.

Based on figures from Morning, the site found that just half outperformed the sector average over the five years to the end of August.

Funds that performed worse than average over five years include the Schroders Income Maximiser, the M&G Global Dividend fund and the Man GLG Japan Core Alpha fund.

Newton Global Income, Jupiter European and Franklin UK Mid Cap were among the outperformers.

Boring Money founder Holly Mackay says: “I’m a proponent of active management but when you look at this it does make you wonder whether people would be better off going for passive funds, paying less and sticking with the middle ground.”

Hargreaves Lansdown told the newspaper three quarters of funds on the Wealth 150 list outperform their sector over five years by an average of 19 per cent.

Its data includes funds that have closed or moved during the period.



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. The answer is active switching advice from the adviser to the client, in order to keep the clients funds within the top performing investment managers, within ones own selected global strategy.

    The question then arises concerning how the Adviser assesses the top performing manager funds, bearing in mind the need to consider one to five years consistency, size, yield and of course manager departures etc. I have a system which enables me to establish “buy” lists across all the major sectors, and rarely does a sector have more than 3, or sometimes 4 funds, in the “buy” list.

    Maintaining exposure to the “buy” list funds can add several percentage points to an investments overall performance, each year.

    Surprisingly, switching from one fund to another (within the same sector) in order to maintain exposure to the “buy” list is not something which needs to be done instantly, although checking the ones own allocation to the “buy” list funds really needs to be done on a monthly basis. In effect, when a fund drops out of the “buy” list, provided the switch is performed within a few months the overall performance does not seem to be greatly affected.

  2. Makes you think, how much thought and effort goes into such lists ? kinda makes you wonder then, of the whole “robo” advice concept leading the potential investor to a fund that’s woefully inadequate ? or there because of some shady affiliation or bias ?

  3. Two of the funds they list as under performing, Schroders Income Maximiser and the M&G Global Dividend fund, are funds aimed at generating reliable and consistent dividends. I don’t know whether they are meeting that mandate but surely that is what they have to be judged against not their performance against the sector.

    We also don’t know the criteria on which these “buy lists” are generated. Funds with low volatility and limited downside may be the criteria.

    The last five years have been pretty good. If you look at the performance of the UK Equity Income Sector it’s doing about 11% per year over the last five years. A fund that outperformed well in the good times may not perform well in less good market conditions.

  4. Trevor Harrington makes a good point. Active monitoring and a few judicious fund switches now and again are the best ways to keep a portfolio outperforming. Many of the funds in my clients’ portfolios have been held for 15 years or more whilst others have turned out to have gone off the boil rather sooner than I would have wished. But that’s what portfolio management is all about ~ stick with the good funds, ditch the duds.

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