While the kids swot for exams, I’ve been doing my own revision – of my portfolio. I’ve earmarked for review a few investment funds which, when I bought them, were top of the pops but have since slid into mediocrity. Check out my list below because they were very popular at the time and it’s likely you could have one or two among your investments as well.
I’ve detailed the reasons why the funds aren’t doing so great at the moment as well as the point of holding on to each one. I’ve also explained what action I’m personally going to take but please don’t take this as financial advice because I’m not recognised by the relevant authorities! If you need help, contact a real financial adviser. We have a guide on how to do that here.
I’ve asked a couple of experts, Laith Khalaf at Hargreaves Lansdown and Ben Yearsley at Shore, to suggest similar funds which could be an alternative home for your investment if you decide you want to move.
Also, as Laith says, bear in mind even the best managers have periods of underperformance, usually because their sector is out of favour. If you’re unlucky, you could switch out just before that sector recovers. Diversification – lots of different funds – is key to avoiding this problem, as is being prepared to hang on for the long term. However, other events may cause poor performance such as staff changes and sometimes you just have to pull the plug.
But back to the funds.
1. Woodford Equity Income
Once the premier fund manager in Britain, Neil Woodford left Invesco Perpetual (see below) and set up on his own. The new fund has suffered from a couple of duff share investments including specialist lender Provident Financial where a restructuring went badly wrong. Mr Woodford has also been backing shares he feels are undervalued but so far the market doesn’t agree. This situation, however, could easily reverse.
My view: The fund is some 10% invested in high-risk small healthcare companies which seem out of place in this kind of investment (which is aimed at providing income, not finding stellar growth). But Mr Woodford has proved himself canny in the past. I’m waiting until Brexit has blown over until I decide whether to stay or go.
Laith picks: Threadneedle UK Equity Income
Ben picks: Artemis Income
2. Invesco Perpetual Income
This is one of the funds Neil Woodford left behind. It was taken over by his deputy, Mark Barnett, who is very much in Mr Woodford’s mould. It’s trailed its peer group for pretty much the same reasons as the Woodford fund. However, Mr Barnett has made some decent returns in the past and could do so again.
My view: My money left this fund along with Neil Woodford. Still, it’s disappointing that it seems to have fallen off its perch. I think the manager is competent enough but you’ll have to be patient for him to find his day in the sun. I’d put the fund on a watching brief.
Laith picks: Threadneedle UK Equity Income
Ben picks: Artemis Income combined with more racy Standard Life Equity Income Unconstrained
3. Artemis Strategic Assets
Former star fund manager William Littlewood has invested this unconventional fund too cautiously and missed out on making as much money as he could. Betting against bonds (which have done well) has also hurt. However, if Brexit goes wrong or some other financial crisis happens, your money would probably be better off here.
My view: I’ve been waiting a long time for the economic Armageddon and feel I’ve missed out. I’ve only got a small investment here so I’m going to move somewhere more flexible.
Laith picks: Pyrford Global Total Return
Ben picks: Troy Trojan
4. Standard Life GARS
This fund aims to deliver an annual return of 5% more than a bank account no matter whether markets are soaring or crashing. It’s designed so you end up sacrificing upside for security via all kinds of very complicated investments. It’s struggled to achieve its aim recently but if a crash happens, you might be glad of the protection.
My view: I don’t own this fund because I’ve got 20 years before retirement and so I’m better off with a higher risk fund which hopefully will produce more growth. GARS is more suitable if you’re retired and you need a guaranteed income. However, I think its investments are too complex and expensive, which impacts the already small potential return on the fund. I’d consider moving somewhere more traditional.
Laith picks: Newton Real Return
Ben picks: Personal Assets (investment trust, essentially a company which invests in other companies, see our guide here)
5. Aberdeen Asia Pacific
Another case of a fund being too cautious and missing out on gains in more racy areas. Nonetheless this is Asia where there are more economic and political risks than in developed economies. A more wary approach here can be appropriate.
My view: I’ve made money with this fund over the long term and still believe in the strategy. But I think I’ll now split my investment between this fund and a more go-ahead one.
Laith picks: First State Asia Focus
Ben picks: Schroders Asian Alpha Plus
For our guides to investment, see here.