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Our investment management partner, Tilney Bestinvest, has just released their latest Spot the Dog study of underperforming funds. The report is something of a bugbear for those fund managers who are destroying value for investors, leaving nowhere for them to hide.
Fund managers at M&G are top dogs for all the wrong reasons: five of the company’s funds are in this latest hall of shame (one more than last year), making up more than half of the underperforming assets on the dog list. That doesn’t just mean that they’ve had a bad year. ‘Dog’ funds are those which have underperformed their benchmark for three consecutive years and lagged their benchmark by 10% over the three years as a whole.
The volatility we have seen in the markets over the last few months has not helped investment managers struggling to keep their funds out of the doghouse. Erroneous fund management decisions which can, to an extent, be masked when markets are booming, are amplified and can have catastrophic consequences in a less forgiving landscape such as that we are seeing in 2016.
The report highlights just how much money is tied up in funds that are consistently underperforming against their benchmarks – a whopping £18bn. Yes, you did read that right – eighteen billion pounds. That’s not just the money of the super rich who can afford to take a financial hit, it is the hard-earned savings of ordinary investors just like you and me. This is money that people are putting aside to fulfil their financial goals such as retiring at a certain age or funding their child’s university education. A failure of the funds to perform can put those goals in serious jeopardy.
So what can you do if you find that your investments are going to the dogs? Well, the first thing is not to panic. Tilney Bestinvest stress in their report that Spot the Dog is not a ‘sell’ list and we all know that past performance, whether good or bad, is not necessarily an indication of how a fund will perform in the future. That said, if you find that you are invested in funds highlighted in the report, it is probably a good idea to investigate further. It could be that action has been taken to improve performance for example, the appointment of a new fund manager or a change in investment approach.
If, having done your research, you believe that performance is unlikely to improve then perhaps you should consider rebalancing your portfolio. Why not discuss the suitability of the investment with a professional financial adviser and work out together where your money could be better invested?
Our consultants would be delighted to hear from you if you are reviewing your portfolio. Infinity has an exclusive partnership with Tilney Bestinvest in Asia. The experience and expertise of the two companies combines to make a dream team enabling you to get the best out of your investments and keep you on track to fulfil your financial goals.
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