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14 February: Bestinvest Spotlights ‘Dog’ Investment Funds
Investment funds worth a combined £45 billion have been named and shamed as consistent underperformers by research from online investing service Bestinvest.
The firm’s latest Spot the Dog analysis shows that fund groups abrdn and Jupiter and wealth manager St James’s Place and were each responsible for six relatively poor-performing funds out of 86 so-called ‘dogs’ identified by the twice-yearly report.
The research defines a ‘dog’ fund as one which fails to beat its benchmark over three consecutive 12-month periods, and also underperforms its benchmark by 5% or more over a three-year period.
A benchmark is a standard measure, usually a particular stock market index, against which the performance of an investment fund is compared.
Bestinvest said the funds, despite their underperformance, will generate £463 million in management fees this year, even if stock markets remain flat.
The analysis highlighted 12 funds that were each worth over £1 billion. These included JP Morgan’s US Equity Income fund worth £3.93 billion, Halifax UK Growth (£3.79 billion) and BNY Mellon Global Income (£3.47 billion).
Also featured in the analysis were Invesco’s UK Equity Income and UK Equity High Income portfolios, described by Bestinvest as “perennially misbehaving funds”.
Bestinvest’s previous Spot the Dog report last summer identified 77 funds worth just under £30 billion. The company says the reason for an increase in the number of poor performers is because of additions from the Global and Global Equity Income investment sectors.
Jason Hollands, managing director of Bestinvest, said: “Spot the Dog has helped shine a spotlight on the problem of the consistently disappointing returns delivered by many investment funds. In doing so, not only has it encouraged hundreds of thousands of investors to keep a closer eye on their investments, but it has also pushed fund groups to address poor performance.
“Over £45 billion is a lot of savings that could be working harder for investors rather than rewarding fund companies with juicy fees. At a time when investors are already battling inflation, tax rises and jumpy stock markets it is vital to make sure you are getting the best you can out of your wealth.”
3 February: Half Of DIY Investors Unaware Of Risk Of Losing Money
Nearly half the people who make investment decisions on their own behalf are unaware that losing money is a potential risk of investing, according to new research from the UK’s financial watchdog.
Understanding self-directed investors, produced by BritainThinks for the Financial Conduct Authority (FCA), found that 45% of self-directed investors do not view “losing some money” as a potential risk of investing.
Self-directed investors are defined as those making investment decisions on their own behalf – selecting investments and making trades without the help of a financial adviser.
In recent years, do-it-yourself trading has become increasingly popular among retail investors.
According to the FCA, over one million UK adults increased their holdings in high-risk products such as cryptocurrencies or crowdfunding investments in the first seven months of the Covid-19 pandemic in 2020.
The research says “there is a concern that some investors are being tempted – often through misleading online adverts or high-pressure sales tactics – into buying complex, higher-risk products that are very unlikely to be suitable for them, do not reflect their risk tolerance or, in some cases, are fraudulent.”
It added that self-directed investors’ investment journeys are complex and highly personalised, but it was possible to categorise investors into three main types: ‘having a go’, ‘thinking it through’ and ‘the gambler’.
The FCA used behavioural science to test various methods of intervention to help investors pause and take stock of their decisions before committing in “just a few clicks”.
It found that adding small amounts of ‘friction’ to the online investment process, such as ‘frequently asked questions’ disclosures about key investment risks, warnings and tick boxes, helped investors comprehend the risks involved.
Susannah Streeter, senior investment and markets analyst at investment platform Hargreaves Lansdown, said: ‘’The boom of high-risk investing is causing huge nervousness among regulators, with the FCA increasingly concerned that vulnerable consumers are being swept up in a frenzy of speculation.
“The ‘fear of missing out’ effect which took hold during the pandemic, has been drawing more people into the murky world of crypto investments and almost half still don’t understand the risks involved.”
26 January: M&G Partners With Moneyfarm On Consumer Investment Service
M&G Wealth is teaming up with financial app Moneyfarm to provide a direct digital investment service aimed at meeting a range of customer risk appetites and profiles.
It will offer a collection of multi-asset model portfolios, backed by a range of actively managed and passive funds.
Multi-asset investing provides a greater degree of diversification compared with investing in a single asset class, such as shares or bonds. Passive funds typically track or mimic the performance of a particular stock market index, such as the UK’s FT-SE 100.
Moneyfarm will deliver the operating models, including dedicated “squads” to support the technology platform and customer relationship management, together with custody and trading services.
Direct investing in the UK has witnessed rapid growth in the past five years, with an annual average increase in assets under management of 18% to £351 billion at the end of June last year, according to researchers Boring Money.
David Montgomery, M&G Wealth’s managing director, said: “With the launch of a direct, mobile-based investment platform, our customers will be able to access the channel, advice and investment proposition that most suits their financial situation and needs.”
Moneyfarm was launched in Milan in 2012 and has 80,000 active investors and £2 billion invested via its platform.
25 January: Bestinvest Relaunches DIY Investment Platform
Bestinvest, part of Tilney Smith & Williamson (TS&W), is relaunching its online DIY investment platform with new features including free coaching, ready-made portfolios and a range of digital tools.
The company says it is revamping its existing platform into a “hybrid digital service that combines online goal-planning and analytical tools with a human touch”. Customers can ask for help from qualified professionals through free investment coaching.
If desired, clients can also choose a fixed-price advice package covering either a review of their existing investments or a portfolio recommendation. Bestinvest said one-off charges of between £295 and £495 will apply depending on the package selected.
The new site will go live to coincide with the end of the tax year on 5 April.
A range of ready-made ‘Smart’ portfolios offering a range of investment options to suit different risk profiles will accompany the launch.
The portfolios will be invested in passive investment funds, while being managed actively by TS&W’s investment team. Passive funds typically track or mimic the performance of a particular stock market index, such as the UK’s FT-SE 100. The TS&W team will adjust portfolios’ exposure to markets and different asset classes according to prevailing investment conditions.
Bestinvest said the annual investment cost will range between 0.54% and 0.57% of each portfolio’s value.
From 1 February, the company added that it is reducing its online share dealing costs to £4.95 per transaction, regardless of deal size.
Bestinvest produces a twice-yearly report on underperforming or “dog” investment funds. It said it wants to bridge the gap between existing online services for DIY investors and traditional financial advice aimed at a wealthier audience.
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