Fidelity takes the battered crown as it has eight funds listed on the list of 151 in the discount broker’s list of worst-performing funds over the last three discrete years, with third or fourth quartile results, based on FE data.
While Chelsea’s commentary has been perhaps harsh on SWIP and Scottish Widows in previous years, it sounded regretful that Fidelity takes the same position this year, saying it was “saddened” that Trevor Greetham’s Multi Asset Strategic Fund “stubbornly refused” to leave the zone.
CFS lists Fidelity’s UK Growth, UK Select, and European Opportunities on the list as others that it was “a shame” feature. Elsewhere, Fidelity had fourth quartile results with its Target TM 2020, Japan, Multi Asset Growth and Multi Asset Open Growth portfolios.
But let’s put this in perspective.
Fidelity is an enormous group, with broad-reaching suite of products available and substantial resources to back that up. Its managers tend to be home-grown and remain at the business for a long time.
It’s a fund management group to be reckoned with and singling out eight funds from its range of around 70 seems disproportionate.
I appreciate Chelsea’s objective in producing its report (and, knowing Darius, any opportunity to inject a football reference to his day will undoubtedly bring him just a little more joy than usual) and as a journalist it, frankly, twice a year does save us a fair bit of time running such numbers ourselves.
But does it tell the full story?
Perhaps not, suggests Haig Bathgate, chief investment officer at Turcan Connell Asset Management, who remains incredibly comfortable with Fidelity, praising the strong research support it provides to its managers, who he says were, for the most part, very competent.
“SWIP’s a whole different set of circumstances, however,” he adds.
He says it is perhaps more accurate to show the number of funds listed as a percentage of a group’s entire fund range, rather than the number itself.
But looking deeper, Bathgate says performance is only one aspect when making an assessment on a fund, with a raft of external influences to take into account.
“When a fund underperforms you need to look at what type of fund it is. Is it investing in an asset class that happens to be out of favour?” Bathgate asks.
Only one aspect
“You need to understand where in the peer group they sit, because some of the sectors are such that, for instance in some of the mixed asset sectors they’d need to outperform the benchmark by 5-6% to be in the top quartile – you really need to understand where in the quartile rankings they sit and why.
“While performance is only one aspect, you need to fully understand the risk. A manager could be generating a reasonable return but what risk are they taking on? They might have had a positive year last year and it looks like they’re underperforming this year, so you need to consider all things on risk-adjusted basis and then further understand what’s driven the particular performance.”
Bathgate says looking at a manager’s investment style was of equal importance and whether a growth or value style was appropriate at the given time for your objectives.
A closer interrogation of FE data, looking at a list of 41 Fidelity retail funds available to UK investors and comparing the three year performance with that of their respective peer groups and index benchmarks shows just fewer than half the funds underperformed in both instances. Or, just more than half outperformed.
To split the hair further, if one looks at the level of out- or underperformance it is marginal in most cases.
A spokesperson from Fidelity says: “We are constantly looking to ensure our range of funds meet the needs of our investor base. Fidelity offers approximately 70 onshore funds covering a range of styles, geographies and asset classes.
“While any underperformance is disappointing, with such a diverse range of funds some of our managers will go through periods of underperformance. Fidelity’s range of funds offers investors a variety of styles and approaches which can be affected in the short term by the prevailing market environment but we aim to outperform the market in the longer term.
“This is a small number of funds in our OEIC range but we do take any underperformance very seriously and do everything we can to make sure our fund managers have the support they need, including access to one of the largest proprietary research teams.”
Bottom line, look under the bonnet – there’s always more to the headlines than meets the eye. But if these negative lists – which do generate column inches (I’ve filled a fair few myself just now) prompt groups to hold the mirror up a little closer to their processes and pick holes in their offering then long may they continue, I say.
