Check your investment isn’t losing you money

THE LAST year has been tough for pension and stocks and shares Isa investors as global stock markets crashed, but some had it a lot harder than others.a shocking number of savers put their money and their faith into investment funds run by bigname asset managers that did not live up to their billing.

Many did worse than the wider market, including some huge funds that manage billions of pounds.

There is no shame in a year or two of poor performance, especially given recent volatility, but there is no excuse if it becomes a habit.

The problem is that many do not realise how badly their funds are doing and end up poorer as a result.

Investment fund platform Bestinvest does its best to help by publishing its twice-yearly Spot the Dog report, which names and shames some of the worst-performing funds and urging investors to check if they hold any that have lost their bite.

Its latest report names 44 consistently poor performers that hold a staggering £19.1billion, a sharp rise since last summer.

Six are worth more than £1billion each, and Bestinvest managing director Jason Hollands said: “That’s a lot of savings that could be working much harder. Isa and pension savers should check if they are exposed.”

POOR PICKS

Last year was tough for stock markets which were hammered by war in Ukraine, tearaway inflation, soaring energy prices and rising interest rates, Hollands said.

These are all beyond the control of stock pickers, but funds have no such excuse if they do worse than their rivals, say, for three successive years while charging high fees for their dubious skills.

Halifax UK Growth was a major disappointment. This “big beast” fund is worth a staggering £3billion but someone who invested £100 in this fund three years now has just £95.

Invesco UK Equity High Income used to be a star fund and remains popular with £2.85billion invested, but it reduced £100 to just £89 over the last three years. It underperformed its benchmark by a thumping 17 per cent.

Scottishwidows UK Growth and Halifax UK Equity Income, both worth around £1.8billion, also lost money over three years.

Two other huge funds, St James’s Place International Equity and HL Multi-manager Special Situations Trust, did rise over three years but only just.they turned £100 into £102 and £105 respectively.

Hollands said big is not always beautiful: “These funds are repeat offenders, so if the companies won’t act to improve performance, investors should vote with their feet.”

DOWNTURN

Small is no guarantee of success, either. The £111million Halifax Special Situations and £64million Unicorn Outstanding British Companies both reduced £100 to

£84 over three years, while investors in Schroder European Sustainable Equity and FTF Martin Currie Global Unconstrained also lost money.

Hollands said UK smaller companies fund MI Sterling Select Companies was a dog: “It undershot its index by 22 per cent, leaving investors just £63 from £100 over three years.”

Last year was highly turbulent, and many funds that did well when interest rates and inflation were hovering close to zero, got caught out as they suddenly rocketed.

Other managers came unstuck because they relied on a handful of big US technology stocks such as Amazon, Netflix and Tesla, which crashed after years of runaway success. Hollands said: “2022 was a rude awakening for them.”

Among managers, Schroders was in the doghouse as it manages the underperforming Scottishwidows and Halifax funds, while Columbia Threadneedle and Abrdn feature heavily on the Spot the Dog list.

COMPARE

Hollands said it is important to check the performance of your funds regularly, to see how they are doing compared to rivals with a similar profile.

Do not sell after one bad year, though. Any fund exposed to the US will have struggled lately, as Wall Street slumped into a bear market. Global funds also did badly, as did emerging market and smaller company funds, while FTSE 100 blue chips did better as investors saw them as a safe haven.

As the end of the tax year looms on April 5, many will be looking to invest at least some of their £20,000 Isa allowance into stocks and shares, and wondering which funds to pick.

Past performance is no guide to the future, but cannot be ignored. Private investors should aim to build a spread of funds covering different countries, regions and sectors, as well as other assets such as bonds, cash, property and gold.that way, one asset may compensate an underperforming one.

‘If companies won’t act to improve performance, investors should vote with their feet’

DRAWDOWN

As more retirees leave their pension invested in the stock market via drawdown, it is vital to keep a close eye on investment performance, said Canada Life’s technical director Andrew Tully: “As living costs rocket, your money needs to keep up.”

With luck, 2023 will be a better year as inflation eases and the global economy starts to recover. Just make sure your funds are recovering, too.

Spot the Dog is available as a free download at Bestinvest.co.uk.