Moneyspider in the News

Investors being lured into turkey funds

Reuters 

Investors are being are being lured into 'turkey' funds managed by big brand fund managers - and could have lost out on profits of up to £30,000 over the past five years, independent research shows. 

Investors are being persuaded by 'seductive' advertising from many high-profile investment houses to put their money into ailing sectors, according to investment data comparison site moneyspider.com. 

It found that those who had ploughed cash into certain funds run by big brand investment houses - such as Invesco Perpetual, JP Morgan Fleming, Jupiter, Threadneedle, and Aberdeen Asset Management - had suffered below sector-average performance. 

They could have achieved far rosier returns by investing in different funds with the same managers. 

A £5,000 investment in Invesco Perpetual's Latin American fund, for example, would have made £31,035 over the past five years. That 602.7 return far outstrips the sector average of 113 percent. But the same sum invested in Invesco Perpetual's struggling North American US Equity fund would have returned a paltry £230 - a mere 4.6 percent rise that grossly under performs the sector average of 28.1 percent. 

Similarly, Jupiter's Emerging European Opportunities fund has risen 525.3 percent over the past five years, compared to an industry average of 257.5 percent. Its Global Technology fund though has yielded 22.1 percent, below a sector average of 55.8 percent.  

These ailing funds would, however, have seemed plausible investments five years ago, given the post 9/11 recovery in America and the resurgence of the technology sector following the bursting of the dotcom bubble in the late 90s. 

Closer to home, Marlborough's Special Situations fund, which focuses on UK smaller companies, has made a £15,530 profit on a £5,000 investment in the last five years. Yet its flagship UK Equity Growth fund, pushed heavily in a major marketing campaign, has yielded just £2,960. 

'The bigger the fund managers have very seductive and powerful marketing campaigns,' said Tony Ahearne, a director at Moneyspider. 'The lesson to be learned is that investors should not be seduced by the multi-million pound marketing muscle of the household name investment houses. Choose the right fund manager - certainly - but make sure you are in the right fund.' 

Andrew Gadd, head of research at independent financial adviser Lighthouse Group, said previous studies have shown that up to 90 percent of investment returns are determined by asset allocation - which depends upon an investor's attitude to risk. 

But he said the Moneyspider research highlights the importance of regularly monitoring investments within any investment portfolio. 

'Investment reviews should consist of both quantitative and qualitative analysis: qualitative analysis would determine, for example, if past performance was perhaps due to a particular fund manger or investment team who have recently left or that future performance may improve because a new manager has recently joined,' he said.