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Friday 13th funds – are you unlucky enough to own one?

Rob Morgan
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These funds have underperformed their sector and have high charges. This suggests caution against holding them. (Source: Getty)

Taking extra care on Friday 13th may be superstitious and irrational behaviour, but caution is warranted for investors holding these funds. They represent a combination of poor returns versus their sector and high charges. The latter suggests they may have an additional impediment to performance going forward.

Paying a fair price

We believe investors should pay a fair price for a genuinely active fund with a well-established investment process aiming to add significant value. Active funds employ managers to try and select the best performing investments, as opposed to passive investments or 'trackers' which simply aim to replicate the performance of an index, say, the FTSE 100, usually by holding all or most of the constituents. However, active funds usually come with higher costs: To hold an expensive and poor-performing active fund represents the worst of both worlds. While past performance is not a guide to the future the funds identified below could fall into this category.

How the ‘Friday 13th funds’ were calculated

The universe of 2,250 onshore retail unit trust and OEIC funds was filtered (on 13/04/2018 using FE Analytics) for bottom quartile performance over 1 year, 3 years, 5 years and 10 years. This means each fund was in the bottom 25% of funds in its sector in terms of returns over all of these time periods.

A further filter was then applied relating to the funds’ Ongoing Charges Figure (OCF). This measures the overall charges and costs borne by the fund with the main exception of trading costs. Only funds with an OCF of more than 1.5%, a figure significantly above the average across the universe, are shown.

Allowances should be made for some

Funds appearing on this list may warrant further investigation to see if they are offering value for money. In some cases allowances should be made. Specialist funds may have been held back by poor returns in the asset class they focus on meaning comparison versus their sector is not necessarily fair.

For example, First State Global Resources resides in the Investment Association Global sector, which mainly contains broad international equity funds. The managers would have had to work miracles to keep up with more diversified funds over the time periods involved due to the poorer returns from most mining company shares.

Table: 'Friday 13th funds' (listed alphabetically)

This article is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investors should be aware that past performance is not a reliable indicator of future results and that the price of shares and other investments, and the income derived from them, may fall as well as rise and the amount realised may be less than the original sum invested. Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus. If you are unsure of the suitability of your investment please seek professional advice.

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