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How would you feel if you invested $10,000 over three years and at the end of the period had a grand total of $8,900? You probably wouldn’t be too impressed.
Well, that’s what would have happened if you had put your money in the HSBC Chinese Equity fund; the worst performing fund in the Asia Pacific sector. Losing 11% of your money after three years of investment is dismal enough, but if you factor in inflation the investment would have actually lost 21% in real terms. That’s the kind of investment everyone can do without.
The figures were revealed in the most recent edition of ‘Spot the Dog’, a regular publication by Infinity’s investment management partners Bestinvest. Spot the Dog is specifically intended to identify investment funds that are not delivering. To be classified as a ‘dog’, a fund has to underperform its benchmark by 10% or more cumulatively over three years – so they really are the worst of the worst.
What this means for investors with money in dog funds is that they are consistently receiving a poor return on their savings. This edition of ‘Spot the Dog’ identifies 64 dog funds which when combined, equal almost $19bn in assets. The tragedy is that this enormous sum of money represents hundreds of thousands of people’s savings – money they are investing for their future. The graph below demonstrates the stark reality over the long term of investing in a dog fund against a fund that hits market benchmarks.
It is hard to believe that $19bn worth of assets is kept in poor performing funds over such a significant timespan which is why Spot the Dog is so unpopular with some fund managers – it calls them to account. However, the information in the publication is based solely on objective criteria and ultimately gives the investor the facts. The publication also identifies the best performing funds, so returning to an example from the Asia Pacific sector, the best performing fund dubbed ‘best of breed’ was the Newton Asian Income Fund. A $10,000 investment with them would have produced $15,800 over three years; a relative three year return of 27% and an investment that would please just about everyone.
If you would like to take a closer look, you can download your own a copy of Spot the Dog. We think you will agree it is an enlightening publication. The detailed work that goes into producing the report is indicative of the high level of research that Bestinvest undertake in the financial markets. It is one of the reasons Infinity chose them as a partner for managing our clients’ investments.
If you would like to know more about how Infinity and Bestinvest can get you a good return on your investments, get in touch for a free consultation.
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