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Friday Five: which fund managers should we sack?

Active fund managers get paid a lot to deliver results on our pensions and ISAs. What should we do if they don't? 

 

by Gavin Lumsden on Feb 01, 2013 at 16:41

Friday Five: which fund managers should we sack?

The idea of sacking fund managers came to me this week after reading two influential reports on good and bad fund manager performance.

The Sanlam (formerly Principal) Income Study and the BestInvest Spot the Dog report are much-loved fixtures on the investment scene. Fund managers, financial advisers and punters rush to see who the brokers are putting the boot into (and also take in the far less compelling aspect of which funds they recommend).

The Sanlam study focuses on 'equity income' funds. These are funds mostly investing in shares (or equities) that aim to deliver a much better income than you get from a savings account. With a bit of luck and good management the income should gradually increase too. Equity income funds obviously appeal to older people looking to live off their savings. However, equity income is a tried and tested route for younger investors too. If you choose the 'accumulation' units of these funds the income is automatically reinvested, giving you a better total return.

The BestInvest report takes a wider look at equity funds investing in the UK and in overseas. As the name suggests it highlights which are top dogs and which are mangy mutts in their fields.

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23 comments so far. Why not have your say?

SJB

Feb 01, 2013 at 16:44

So, why don't you name them?

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David West

Feb 01, 2013 at 16:44

While I have nothing against ETF's I think it worth mentioning that capital is not protected and grown to the same degree as a lot of atively managed investment trusts and funds. Of course management charges are important but in my opinion should not be held in such high regard as one of the main reasons to use ETF's - the other being that most managers do not beat indices.

If you want to bet on gold an ETF investing in physical gold is probably the best way. However, if you want to have an equity or bond investment where the manager has a remit to protect and or grow the initial capital, a trust or fund to my mind is the best option. There is not much point in holding a fund paying a dividend of 5% when the initial capital either deminishes or grows by less than inflation. Ideally the capital should grow comfortably above inflation as has Neil Woodfords Perpetual Income Fund over the last ten years.The same argument applies whether the income is reinvested or taken.

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Rob Walker

Feb 01, 2013 at 17:31

Vacuous twaddle Gavin, don't ask the question if you won't give the answer. I've just waded through this article and it has enhanced my investing skills by 0%.

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rik

Feb 01, 2013 at 17:44

Yawn!!!

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TJLamb

Feb 01, 2013 at 18:00

Sensationalist to show a picture of Neil Woodford with the headline 'which fund managers should we sack'.

If he is offended I don't blame him, but he'll probably just carry on doing what he does best - preserving capital for those who want that from a fund manager.

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Lost my marbles

Feb 01, 2013 at 18:08

Suggest we sack the author of this waste of space article.............along with any duff fund managers who remain nameless!

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Mike H

Feb 01, 2013 at 18:37

Name and shame . . . we need to know!

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Bob Foster

Feb 01, 2013 at 18:51

SJB, Lost my marbles, and Mike H if you really want to know, go to the Bestinvest website and download their dog fund list, they name them all.

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Dave Kempton

Feb 01, 2013 at 19:52

Complete and utter drivel. If you are going to write an article suggesting that some managers deserve sacking then at least put up or shut up i.e. name them!

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Volume

Feb 02, 2013 at 08:05

I would sack any manager who is in a minus situation after 12 months,Bolton, geffen,both have been minus 30% recently,these guys are supposed to be superstars and are payed mega bucks to lose your money.

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Geoff N

Feb 02, 2013 at 08:41

Deeply offensive to have a headline like this together with someone like Neil Woodford.Very poor journalism.I always thought that Citywire was better than this - clearly I was wrong.

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MoneyObserver

Feb 02, 2013 at 09:51

Sadly Invesco Income and High Income funds have not been star performers for years and years.

The 'downgrade' was justified.

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John Stillitz

Feb 02, 2013 at 10:14

I really thought this article was going to be a well written piece of Financial Journalism. Not so.

Last month I wrote to a well known Unit Trust company to raise the question to why my investments of several of their funds in different segments were all performing well below the average in their particular sectors.

Your article was particularly feeble because you have so much information at your disposal to easily identity which, if any, fund managers are consistently underperforming.

Clearly with world stock markets performing well, it surely would not be difficult for Citywire

to identify which fund managers are seriously letting investors down which are why I remain very disappointed with your article and why in my opinion it served no purpose.

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John Stillitz

Feb 02, 2013 at 10:28

I really thought this article was going to be a well written piece of Financial Journalism. Not so.

Last month I wrote to a well known Unit Trust company to raise the question to why my investments of several of their funds in different segments were all performing well below the average in their particular sectors.

Your article was particularly feeble because you have so much information at your disposal to easily identity which, if any, fund managers are consistently underperforming.

Clearly with world stock markets performing well, it surely would not be difficult for Citywire

to identify which fund managers are seriously letting investors down which are why I remain very disappointed with your article and why in my opinion this article served no purpose.

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RippedOff

Feb 02, 2013 at 12:28

FSA Press Release in 2000 says one "cannot increase their chance of choosing a fund that will perform well in the future by picking one that has performed well in the past, according to research published today by the Financial Services Authority"

For their report on the link between Past Performance and Future

Performance, and the associated report itself as a pdf.

http://www.fsa.gov.uk/library/communication/pr/2000/107.shtml

http://www.fsa.gov.uk/pubs/occpapers/op09.pdf

Hence an advisor (with many awards) is selecting funds with the lowest TER and turnover of stocks.

Has anyone else come accross the adoption of the above FSA approach and I wonder why its not widely known.

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Man On The Inside

Feb 02, 2013 at 15:18

The problem with sites like this is that they pander to large fund houses who sponsor them. You cannot make sweeping statements without backing it up by naming people.

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David West

Feb 02, 2013 at 16:48

@ MoneyObserver

Invesco Perpertual High Income and Income funds by not have increased in value as much as some other UK Equity Income funds over the last decade but during that time they have both produced decent and steady dividend income and also increased the capital value considerably.

They most definitely do not warrant a downgrade. Neil Woodford may not shoot the lights out during periods such as the one we are currently in when markets go up quickly. What he does do however is avoid speculative investments (technology bubble springs to mind) and his judgement in so far as going against the herd has proved valuable over the course of time.

If one is looking for a relatively secure fund that is consistent and steady Neil's funds are two of the best.

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bhajan

Feb 03, 2013 at 10:50

In the late nineties when neil woodford and other noted economists were warning of dot com bubble, the media was portraying them as nuts.Neil woodford will prove to be a safe hand again.

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the scout

Feb 03, 2013 at 16:01

Lumsden you are a waste of space.

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Volume

Feb 03, 2013 at 17:44

I would sack any fund manager that produces a minus after 12 months.some of these so called superstar managers have been minus 30% recently.i tried to name names but they obviously would not publish my comment.dont forget these guys are paid mega bucks to lose your money.

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Broomtree

Feb 03, 2013 at 23:24

The 'Sun' of financial journalism, this was terrible - misleading headline, then the only photo and suggestion is one of the best [over time] fund managers in the country....and the worst, the ones who should be sacked....shall remain nameless

If Citywire need to make cuts you must be a pretty good contender Gavin!

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MoneyObserver

Feb 04, 2013 at 09:15

Just because Neill Woodford has been good in the past does not mean he will be again.

Star fund managers can lose their lose their peak performance permanently.

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Volume

Feb 04, 2013 at 09:25

I would sack any manager who is in a minus situation after 12 months,dont forget these so called superstar managers are getting mega bucks for losing your money.some of these top fund managers have been down 30% recently,I know as they have been playing with my money.

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