FE data reveals the 45 Investment Association (IA) funds that, over both one and three years, have given investors a fright by being the most volatile, with the added shock of delivering the worst performance figures[1].
FE research manager, Charles Younes, comments: “Volatility can be tolerated by investors if it is characteristic for the asset class or market they are investing in and they can also stomach bumps along the way if the fund is returning good performance figures. In the case of these funds however, investors will have been well and truly spooked. They have provided all the ups and downs associated with high volatility but crucially, have nothing but significant underperformance of their sector to show for it.”
Of the 45 funds, five Infrastructure and Energy funds feature in the list: First State Global Listed Infrastructure, Pictet Clean Energy, LF Macquarie Global Infrastructure Securities and Guinness Alternative Energy. All have struggled due to restrictions on the sectors they can invest in and oil prices. See the full list of 45 funds below.
Younes explains: “The Infrastructure and Energy funds in the list are all restricted to invest in specific sectors and their performance is naturally, highly dependent on the success of those sectors. The funds’ three-year performance shows the pitfalls of investing in thematic funds. Infrastructure funds in general also suffered from their sensitivity to interest rates, which increased over the same time period. With regards the energy funds; they are heavily dependent on the direction of the oil price, which was predominantly negative over the time periods mentioned.”
Equity funds: Oyster European Selection, Jupiter UK Growth and Schroder European Recovery, also made the list. Younes comments: “The managers of these funds all adopt a bottom up approach to stock picking but have made several mistakes in the recent past. In the case of the Schroder fund, this has triggered a change in the management of the fund and with that, a change in the investment style.”
Full list of 45 IA funds with both 4th quartile volatility and 4th quartile excess return figures, within their sector, over the last one and three years. All data to last month end.
[1] The 45 funds in the list were based on filtering a full list of Investment Association funds. Firstly, the list was filtered to show funds in the 4th quartile for volatility in their sector over both one and three years. A second filter was added on the remaining funds to show those that were also in the 4th quartile for cumulative excess return against their sector over one and three years.
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[1] The 45 funds in the list were based on filtering a full list of Investment Association funds. Firstly, the list was filtered to show funds in the 4th quartile for volatility in their sector over both one and three years. A second filter was added on the remaining funds to show those that were also in the 4th quartile for cumulative excess return against their sector over one and three years.
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