Flagship funds that have fallen from grace
The financial crisis has exposed the frailties of a number of high-profile managers as well as making some sectors completely uninvestable.
While financial institutions like Bear Stearn, Lehman Brothers and Northern Rock were the highest profile casualties of the credit crunch, a number of popular retail funds also lost their shine during one of the worst periods for investment in living memory.
Here FE Trustnet looks at some of the worst performers of the last five years.
Schroder UK Mid 250
Bestinvest’s Adrian Lowcock picks the £1.1bn Schroder UK Mid 250
fund as one of the stand-out losers from the crisis.
’s fund has been a repeat offender in our Spot the Dog guide since 2008, appearing in sixth consecutive rebalances,” he said.
Dog funds are defined as those that have fallen short of their benchmark in each of the last three years and underperformed by 10 per cent or more over the cumulative period.
Our data shows that the fund has lost 9.6 per cent over the last five years, dramatically underperforming the FTSE All Share which returned 6.86 per cent.
BlackRock UK Absolute Alpha
Lowcock has also been disappointed by the £910m BlackRock UK Absolute Alpha
“It had a fantastic 2008 and Mark Lyttleton
is a big name with the power to draw a lot of inflows. However, since then it has been underwhelming and IFAs are looking elsewhere for exposure to the Absolute Return asset class.”
The fund was one of the few which managed a positive return during the dark days of the financial crisis, posting a gain of 1.8 per cent in 2008.
While the fund is up 11.6 per cent over the five years of the financial crisis, disappointing results in 2011 have seen investors question the manager’s ability to deliver on its promise of a positive return in all market conditions.
With the benefit of hindsight it’s easy to say that investors should have seen the demise of Manek Growth
coming. The £21.9m fund was born when chemist Jayesh Manek won a newspaper stock-picking competition. Financial backing from the City and a marketing offensive saw the fund receive impressive inflows.
Manek made big bets on oil and technology companies and investors were rewarded with dramatic outperformance in 2005 and 2007. In the three years preceding the dramatic fall of the stock market on 26 August 2008, Manek Growth returned 53.79 per cent. This compares to just 12.17 per cent from the average fund in the UK All Companies sector.
Since that date, however, the fund has plummeted. Investors have lost 50.27 per cent since the stock market crash, leading commentators to speculate that Manek’s periods of outperformance have been more to do with luck than skill.
Performance of funds over 5 years
Source: FE Analytics
Aviva Inv Property Investment
Our data shows that the Aviva Inv Property Investment
is among the worst performers in the entire IMA universe over the last five years. During that period it has lost 34.21 per cent.
Hargreaves Lansdown’s Danny Cox says that the demise of property investment tells the story of the global financial crisis.
“Property funds were incredibly popular before 2007 as the housing market seemed to defy gravity. The sub-prime mortgage crisis evaporated confidence and we still don’t believe there is any value there,” he said.
“Prime London property is the only sector offering any capital appreciation and there are no funds with 100 per cent exposure there. Any yield offered by rent is cancelled out by capital falls and a lack of liquidity in the sector.”
The turmoil caused by the crisis has crippled growth in the developed world and forced central banks to slash interest rates in a bid to encourage spending.
The biggest impact this has had on investment is that cash is no longer a viable store of value. High inflation and a record low base rate mean that putting cash into a Money Market fund essentially guarantees investors a negative return.
“Before 2008 it was normal for investors to put chunks of cash into money market funds and receive a small return while they waited for opportunities elsewhere,” said Cox. “The financial crisis has taken this ability away and investors are forced to put their money in riskier products.”
“Cash funds now only serve as a store of liquidity and are otherwise uninvestable.”