Heavily recommended funds that do not deserve your money

If imitation is the sincerest form of flattery, the fund shops that publish “bestbuy” lists must really admire one another. Such lists are meant to identify the highestquality funds, seed ideas in investors’ brains and give them a helping hand on what to buy. However, there’s a problem: they’re all similar and offer plenty of duff picks.

The main lists produced by the 10 largest fund shops provide limited help for investors looking for fresh ideas. Most of the funds are leaders in their field and have made good returns, but there are plenty that are poor and should be reassessed by investors.

Telegraph Money has looked at the worst offenders and offers some

A Japan fund popular with buy lists has returned 106pc over 10 years but a less high-profile rival has made 125pc alternatives to the most disappointing funds on the best-buy lists.

MAN GLG JAPAN CORE ALPHA

Stephen Harker and Neil Edwards’s £1.8bn portfolio is one of the most recommended funds. However, it has also been one of the worst performers.

It is among the bottom of the pile of Japanese company funds over one, three and five years and is below its peer group average over the past decade. The fund buys “value” stocks – those priced below the managers’ view of their true worth. This style has been shunned by other investors, who have opted for fast-growing companies instead.

Yet other “value” funds have fared better. The £486m Morant Wright Japan portfolio, popular among professional investors, has returned 125pc over the past decade, compared with 106pc for the Man GLG fund. It invests in smaller companies than its rival but the managers still strictly buy “value” investments. It charges 1.16pc a year, higher than Man GLG’s 0.9pc.

JANUS HENDERSON STRATEGIC BOND

This £2.8bn fund has been managed by John Pattullo since 1999 and Jenna Barnard since 2006, so it has an experienced team. But, it is no longer top of the pile and its return of 67pc over the past 10 years means it is not among the top 25pc of bond funds over the period.

The £1.4bn Baillie Gifford Strategic Bond fund, by contrast, which yields 3.5pc, has more than doubled investors’ money over the past decade. It has steadily become a top performer but is recommended by only one fund shop.

It lends to American tech companies such as Netflix as well as businesses in areas others tend to avoid, meaning it can get better value. It is cheaper than many rivals, with a charge of 0.52pc a year, while Janus charges 0.68pc.

FIDELITY MONEYBUILDER INCOME

As its name suggests, this fund is supposed to produce good returns, but has not been as successful as the four fund shops that backed it would have hoped. The £3.3bn portfolio has failed to beat its peers over three, five or 10 years. A fund that does not feature on the best-buy lists is the £626m Liontrust Sustainable Future Corporate Bond fund. Performance has been strong: it has beaten its rivals over the past decade and has done particularly well in the past five. The managers lend only to companies that meet their strict ethical criteria; they believe such firms are the safest to lend to over the long term. However, the fund costs 0.61pc, slightly more than the 0.56pc charge on the Fidelity fund.

JP MORGAN US EQUITY INCOME

‘Best-buy’ fund lists have a habit of promoting poor performers. Jonathan Jones finds some superior options

Return from Baillie Gifford’s bond fund over 10 years. Janus Henderson managed just 67pc

Picking an American income fund is difficult, as the market is dominated by technology companies that don’t pay dividends. This fund appears on four best-buy lists, yet it has failed to beat the S&P 500 index since its launch. This prompts the question: why not buy a tracker fund instead? The £1.7bn iShares US Equity Index is the cheapest: its fee is 0.05pc, lower than JPMorgan’s 0.79pc. Fidelity, HSBC, Legal & General and Vanguard also offer cheap tracker funds.