The RedZone lists the worst performing funds in each Investment Association sector, with the IA Global and IA Global bond sector making a strong showing with 24 and 15 funds listed respectively, for underperforming the sector’s average percentage growth.
Of the global equity funds, both MFS Global Meridian Energy and Guinness Alternative Energy reported negative growth while three Templeton global bond funds and one Pimco GIS Euro Short Term fund failed to hit even 3% growth over the last three years, severely underperforming the sector average of 21.25%.
The number of continually underperforming funds in the IA Global sector is sure to be disappointing for investors given the ‘universe of stocks available’ to global managers, Chelsea’s research director Juliet Schooling Latter said. However, she adds “thankfully the number of good, actively-managed global equity funds is greater”.
“The IA Global Emerging Market Bond sector has faced a few headwinds recently and it is worth noting that six of the funds appearing in the RedZone invest in local currency bonds. As the US dollar has continued to strengthen, emerging market currencies have been hit pretty badly, explaining why these funds are suffering. It is something to be aware of when investing in this sector – and indeed others,” she said.
“Currency movements tend to balance out over time, but we have seen some dramatic moves in recent months and they can have a big impact on performance. Should the US dollar stabilise or weaken, these local currency emerging market bond funds may well see their performance strengthen.”
The Salamanca Global Property fund won the dubious honour of topping Chelsea’s Dropzone list as the worst performing fund over three years, underperforming its sector average by 69.03% and knocking the Web Capital Smaller Companies Growth fund to second place which had suffered a number of years at the top.
However, it was not all bad news with Aberdeen Asset Management on the brink of turning around its recent dire performance, Latter said, and the total number of funds in the RedZone has fallen by 40%, from 259 to 184 over the last year.
