Tilney Bestinvest the leading UK investment and financial planning firm has released its bi-annual report into the worst performing investment funds those who wish to build a drawdown portfolio should have avoided.
With the shift from annuities to pension drawdown gathering pace there is a new wave of potential investors who once would have never been the target market for fund manager. The ongoing bull market has strengthen appetite for equities and managed funds after a bruised level of confidence immediately post financial crash.
Rising markets have given even those with poorly managed funds a decent return, but how well could they have done with a little more research or with good advice? Bestinvest have looked at the Dog funds you would rather have sent off to the kennel.
They have looked at 60 funds and ranked them solely on statistical data relating to poor performance against their benchmark. The funds must first have failed to beat their benchmark over three consecutive years but also under performed their benchmark by 10%.
Their research is broken down into geographical regions for the analysis.
In the doghouse of the UK smaller companies sector is SF Webb Capital Smaller Companies Growth which has a -67 relative 3 year % return. This is against the sectors best worst performing fund Liontrust UK Smaller Companies with a 4% positive 3 year return, highlighting that this sector hasn’t been relatively positive during this timeframe. If you’d have been in these funds with your income drawdown plan and making withdrawals, the negative returns would be compounded shortening the sustainability of an income into later retirement.
Europe faired a little better as an area to diversify into with the worst returning fund Neptune European Opportunities showing a -17% return over the 3 year timeframe. The best worst, JPM Europe Dynamic (ex-UK) GBP Hedged, barked its way to 24% over the 3 years.
A sector which gives excitement to some and send the fear of god into others is emerging markets. Again with hindsight you probably wouldn’t have wanted these funds in your pension drawdown portfolio. FP HEXAM Global Emerging Markets would have diminished its value by -37% over 3 years whilst Lazard Emerging Markets would have given you the best worst outcome with 0% growth.
Probably the best performing sector is the US equity markets which have, in recent years defined the term bull market. If your fund hasn’t performed in this sector you’d probably be wanting to make a direct call to your fund manager. IFSL Harewood US Enhanced Income was the worst performing over 3 years with a -18% decline whilst Dodge & Cox Worldwide US Stock would have been the best of a bad bunch with 6% over 3 years.
Looking at the individual investment houses Neptune and Aberdeen had the most funds in the doghouse whilst M&G were responsible for the largest proportion of clients’ money not performing.
You can download the full report from investment expert’s bestinvest here