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Investing in funds is often seen as a safer route for growing wealth, especially for those who do not have the time to manage their investments actively. However, not all funds live up to their promises.
The latest data from the Bestinvest Spot the Dog Report (August 2024) reveals the 10 biggest underperforming funds over the last three years, highlighting significant gaps between investor expectations and fund performance.
Here's a breakdown of these funds and what investors need to watch out for.
1. Artemis Positive Future Fund
Sector: Global
Value of £100 after 3 years: £62
Underperformance: -71%
The Artemis Positive Future Fund, focusing on global investments, has seen a massive decline, losing 71% against its benchmark. For every £100 invested, the value has dropped to £62 after three years. This stark drop should serve as a red flag for investors relying on this fund to secure returns in a rapidly evolving global economy.
2. Baillie Gifford Global Discovery Fund
Sector: Global
Value of £100 after 3 years: £40
Underperformance: -65%
Baillie Gifford is known for its ambitious investment strategies, but the Global Discovery Fund has not performed well, leaving investors with only £40 for every £100 invested. The 65% underperformance compared to the benchmark is a signal that their high-risk approach may not be paying off as expected.
3. FTF Martin Currie Japan Equity
Sector: Japan
Value of £100 after 3 years: £53
Underperformance: -64%
Focused on Japan’s equity market, the Martin Currie Japan Equity fund has significantly underperformed. With returns plummeting to £53 for every £100 invested, it suggests that this fund has not been able to capitalize on Japan’s market opportunities.
4. AXA ACT People & Planet Equity Fund
Sector: Global
Value of £100 after 3 years: £80
Underperformance: -53%
Despite its focus on sustainability, the AXA ACT People & Planet Equity Fund has underperformed by 53%, diminishing its appeal to investors who not only want to make a positive impact but also expect solid returns.
5. Aegon Sustainable Equity
Sector: Global
Value of £100 after 3 years: £82
Underperformance: -52%
Similarly, Aegon’s Sustainable Equity Fund has not lived up to its name. Despite being in a booming global sector, this fund has underperformed by 52%, leaving investors with £82 for every £100 invested. This underlines the importance of balancing sustainability with returns.
6. IFSL Marlborough Global Innovation Fund
Sector: Global
Value of £100 after 3 years: £82
Underperformance: -51%
Innovation funds are often considered high-risk, high-reward. However, the IFSL Marlborough Global Innovation Fund has failed to meet its benchmark, underperforming by 51%. Investors expecting significant returns on tech and innovation investments will be disappointed by this outcome.
7. L&G Future World Sustainable UK Equity Fund
Sector: UK All Companies
Value of £100 after 3 years: £74
Underperformance: -51%
Focused on UK companies, this fund's 51% underperformance reveals that even with a focus on sustainability, fund managers have not been able to navigate the complexities of the UK market effectively. Investors should be cautious before continuing their support of this fund.
8. Baillie Gifford Japanese Smaller Companies Fund
Sector: Japan
Value of £100 after 3 years: £56
Underperformance: -47%
Baillie Gifford's second appearance on this list further underscores potential issues with its strategy in international markets. The Japanese Smaller Companies Fund has underperformed by 47%, which should be alarming for those focused on Japan’s economic resurgence.
9. FSSA Japan Focus Fund
Sector: Japan
Value of £100 after 3 years: £70
Underperformance: -47%
The Japan Focus Fund from FSSA, like other Japan-centric funds, has failed to deliver substantial returns, leaving investors with only £70 for every £100 invested. This highlights the continued challenges of investing in the Japanese market.
10. Baillie Gifford European Fund
Sector: Europe excluding UK
Value of £100 after 3 years: £74
Underperformance: -46%
Baillie Gifford rounds out the list with its European Fund, which underperformed by 46%. Given the strength of the European markets in recent years, this performance may indicate deeper issues within the fund’s management strategies.
Key Takeaways for Investors
High-Risk Strategies Are Not Paying Off: Funds that rely on ambitious growth strategies, particularly in volatile markets such as Japan and global innovation, have seen significant underperformance. Investors should carefully evaluate their risk tolerance before investing in these types of funds.
Sustainability Does Not Guarantee Success: Funds with a focus on sustainability and ethical investing, such as the AXA ACT People & Planet Fund and Aegon Sustainable Equity, have also failed to deliver, proving that good intentions don’t always translate to financial rewards.
Review and Reassess Regularly: If you’re invested in any of these funds, it’s essential to reassess your investment strategy. With underperformance ranging from 46% to 71%, continuing to rely on these funds could erode your wealth over time.
Conclusion
This report serves as a stark reminder that not all funds perform equally, and some can significantly underperform compared to their benchmarks. Investors need to remain vigilant, review their portfolios regularly, and avoid the complacency of assuming fund managers will always deliver.
For those seeking alternative investment strategies, platforms like www.campaignforamillion.com may offer more control and transparency in managing your investments.
By being proactive and informed, investors can avoid the pitfalls of underperforming funds and ensure that their wealth grows in line with their expectations.
Alpesh Patel OBE
Visit www.alpeshpatel.com/shares for more and see www.alpeshpatel.com/links
Disclaimer: The content provided on this blog is for informational purposes only and does not constitute financial advice. The opinions expressed here are the author's own and do not reflect the views of any associated companies. Investing in financial markets involves risk, including the potential loss of your invested capital. Past performance is not indicative of future results.
You should not invest money that you cannot afford to lose. Mentions of specific securities, investment strategies, or financial products do not constitute an endorsement or recommendation. The author may hold positions in the securities discussed, but these should not be viewed as personalised investment advice.
Readers are encouraged to conduct their own research and seek professional advice before acting on any information provided in this blog. The author is not responsible for any investment decisions made based on the content of this blog.
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