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Worst-performing funds of 2018 bounce back up to 19%

Some of the worst-performing UK funds of the 2018 made a swing of up to 19 per cent in performance in the first five months of 2019.

Research by investment platform Willis Owen looked at funds in the Investment Association’s UK sectors to compare their performance against the previous year.

The analysis found that Allianz UK Mid Cap, which was the third worst-performing fund last year, returning – 23 per cent, has bounced back by 19 per cent in the first five months of this year.

The second biggest comeback was made by Threadneedle UK Smaller Companies, followed by Merian UK Dynamic Equity in third place, boasting returns of 17 per cent and 16 per cent respectively in 2019 recovering from – 21 per cent and – 19 per cent the year before.

Even fund manager Neil Woodford, currently under fire for performance of his flagship UK Equity Income Fund, experienced a modest gain in performance of 0.32 per cent this year with his LF Woodford Income Focus fund – up from – 20 per cent.

Willis Owen head of personal investments Adrian Lowcock says: “It is interesting to see the LF Woodford Income Focus Fund appear in the list. This is the version without all the unlisted equity, being more of a core equity income portfolio.

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“It shows that Woodford’s performance woes are not only due to holding unlisted stocks. While Woodford’s view on the British economy have largely been accurate, the fund’s positioning has suffered when we reached high levels of Brexit uncertainty, such as in December and again this May, when Theresa May announced her resignation.”

The funds listed in the table below have recovered from underperformance of up to -24 per cent in 2018 to produce positive returns for investors this year amid a turbulent period for investments – largely stemming from the escalating US/China trade war and the ongoing uncertainty around Brexit.

Lowcock says: “Only one continues to lose money: the L&G UK Alpha Trust. This was a well-managed fund under Richard Penny, but since his departure the fund was under a caretaker manager before Rod Oscroft took the reins at the start of 2018. He has struggled in the volatile markets – capturing much of the downside but not benefitting when markets have rebounded.

“Overall, the worst performers from 2018 have fared okay in 2019 – a reminder that short-term poor performance is not a good reason to sell a fund.

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“The worst performers tended to invest in the more volatile, riskier mid-cap and smaller companies and have unconstrained portfolios that do not follow benchmarks. These types of funds are likely to suffer more in sell-offs driven by short-term changes in sentiment as investors sell first and ask questions later,” he says.

Fund 2018 performance (%) 2019 performance (%)
Allianz UK Mid Cap -22.62 19.3
Threadneedle UK Smaller Companies -20.67 17.13
Merian UK Dynamic Equity -19.40 16
Quilter Investors Equity -23.70 15.68
Merian UK Mid Cap -21.54 14.57
Rathbone UK Opportunities -19.43 13.4
Artemis UK Select -19.70 12.03
Standard Life Investments UK Equity 6.30
LF Woodford Income Focus -20.25 0.32
L&G UK Alpha Trust -25.05 -2.8

Source: Willis Owen

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