Some of Tony’s fund managers have been beaten by robot-controlled competitors
Since we started creating our shopping list using Amazon’s Alexa voice assistant, my supermarket trips have become a far more trepidatious affair.
What precisely were the ‘wooden picks’ Mrs H had requested this week? I opted for cocktail sticks, but on arriving home was greeted with a puzzled frown and told that, of course, I should have realised she wanted wooden clothes pegs.
Ploughing through my investment funds earlier this year was a similar experience, as I stared at some and wondered if I could ever have really intended to buy them.
Over the years I’d accumulated a hotch-potch of around 35 funds in both my Isa and Self Invested Personal Pension (Sipp), some of which were in favour when I was Money Mail editor but have since fallen from grace.
There were trackers following various indices, which I have kept, but the actively managed funds supposedly run by experts needed judicious pruning.
The good news was that a number of core investments had continued to plug away year in, year out, pushing my portfolio forward with little input from me. Some had positively sparkled.
Chief among these was Old Mutual Smaller Companies Focus, a fund I picked up several years ago. This does what it says on the box, investing primarily in a limited number of small UK companies.
It was the best-performing UK investment fund last year, turning every £1,000 invested into £1,507, according to figures covering all funds published in the specialist magazine Money Management.
Not surprisingly, from humble beginnings, it has become one of my larger holdings. Like all managed funds it has its shaky periods.
But analysis website FE Trustnet still shows it has doubled my money over three years and increased it by a whopping 180 per cent in five years — turning £1,000 into £2,800.
But then there was the same fund manager’s Global Best Ideas fund which might be better renamed Modest Ideas.
FE Trustnet figures show it has provided a return of around 48 per cent over five years.
Compared with what I might have got in a savings account that’s a terrific return.
Old Mutual Smaller Companies Focus was the best-performing UK investment fund last year, turning every £1,000 invested into £1,507
But weighing it against the Investment Association’s Global index, which tells us how a typical basket of shares in major companies around the world might have grown over that period, tells a different story.
Just tracking this I would have made 62 per cent. The obvious question was why am I paying a fund manager when a robot has done a better job and more cheaply? So I sold it.
I stared at the name Man GLG Balanced Managed. What was this and how had it crept into my portfolio? Had Amazon Alexa been playing tricks on me again?
A quick chat with Mark Dampier, a funds guru at investment firm Hargreaves Lansdown, sparked illumination. GLG had run a technology fund which had been buried into this. Might I have bought that?
Well, yes. What I couldn’t explain was why a fund manager would think technology investors would want to head into a stodgy balanced managed fund.
Here’s a lesson for all of us. When we get letters telling us of fund mergers we really must act on them. Clearly, my attention was elsewhere at the time when I was informed.
Another one bites the dust.
More needed to go. I’d plumped for a fund called Jupiter New Europe (Offshore), several years ago in a fit of excitement about the prospects for emerging East Europe markets. But the fund is dominated by investments in Russia (around 50 per cent of its holdings) with Turkey around 15 per cent.
At one time that may have been fine, but I am no longer comfortable with it. More to the point, it had delivered me practically no profits over the past five years. I sold it at a tad above the price at which I bought it.
What of Jupiter Absolute Return — a fund that for me has delivered an absolutely ghastly return? This fund gave the manager freedom to do more or less what he wanted, and it looked as though he proceeded to do nothing at all after the 2008 banking crisis.
There’s been a change of manager but it remains very defensive, returning just 16 per cent in five years. Absolutely no point in keeping it, so I sold.
Threadneedle UK Equity Alpha also bit the dust. The previous manager, who had done a great job, retired. The new incumbent’s performance is so-so.
My mission to clear out funds that have disappointed or are no longer appropriate is well underway. So far I have sold 11. But I also want to construct a more rewarding portfolio going ahead.
Ringing in my ears is a message from Mr Dampier that all investors in active funds should heed: ‘If you are going to invest your money in active funds then you need to be active in monitoring changes and developments. You also need to be patient, because there will be periods of underperformance.’
Otherwise you may be better off with a tracker.