We recently carried out a review of funds that have a Bestinvest star rating and we have downgraded a number of them to one star. The downgraded funds fall short of the high bar we set when analysing funds. We classify a one-star rating as ‘switch’, meaning that there are similar funds available that we have higher conviction in.
Published on 25 Feb 20145 minute read
Written by Lee Dooley
You can see a list of downgraded funds below. For each fund, we give a brief overview of why we downgraded it, and our preferred funds.
If you have any questions about your investments or the funds featured below, please call us on 020 7189 2400 or email us at email@example.com. A member of our team would be happy to speak to you.
Old Mutual UK Mid Cap – 2 stars to 1 star
This fund has assets under management of £2 billion, which is very large. The portfolio is relatively concentrated compared to its peers, holding 39 companies. AXA Framlington UK Mid Cap and Franklin UK Mid Cap are our preferred options.
Jupiter UK Growth – 2 stars to 1 star
This fund has been very volatile over the last year, losing 7% of its capital when the UK market rose 17%. Steve Davis took over as manager of the strategy in May 2015, after previously running the fund in a co-manager capacity since January 2013. We believe the manager’s track record is fairly limited and there are alternative options that we have higher conviction in, including Liontrust Special Situations and AXA Framlington UK Select Opportunities.
Fidelity Special Situations – 2 stars to 1 star
We do not believe that this is a bad multi-cap fund. But assets under management are relatively large (currently £2.7 billion), causing potential liquidity issues given that the small and mid-cap allocation together account for around 65% of the fund. Manager Alex Wright also runs a number of other funds. Our preferred options are Liontrust Special Situations and AXA Framlington UK Select Opportunities.
Franklin UK Equity Income – 2 stars to 1 star
We downgraded this fund to two stars in 2010 and a new manager has been in charge of the fund since October 2011. The group reduced its ongoing charges figure to 0.45% recently, but we have higher conviction options in this sector – Schroder UK Alpha Income and Threadneedle UK Equity Income.
Artemis Capital – 2 stars to 1 star
The manager’s style was in favour in August 2013 when we gave the fund two stars – ultimately, however, we have higher conviction in other funds in the sector. Majedie UK Equity and Old Mutual UK Alpha are two such funds.
Standard Life UK Equity High Income – 2 stars to 1 star
After a period of poor performance we downgraded this fund to two stars in February 2012. We believed the style wasn’t suited to the investment landscape following the financial crisis. Performance has been middling since our downgrade. Schroder UK Alpha Income and Threadneedle UK Equity Income are our preferred options.
CF Odey Opus – 4 stars to 1 star
Crispin Odey is undoubtedly a talented manager, but the performance of this fund has been erratic and returns tend to be lumpy, both on the upside and downside. Despite Odey, you need to have a strong stomach to hold this fund and we have higher conviction in other funds from the same sector.
Aberdeen Global World Equity/Aberdeen World Equity – 2 stars to 1 star
These Aberdeen funds have performed poorly over most time periods. An overly cautious positioning has been costly and there are no signs of the manager changing stance. These funds have a deep contrarian strategy.
Artemis Global Growth – 2 stars to 1 star
Artemis uses a quantitative system it calls ‘Smart GARP’ (growth at reasonable price) when managing this fund. Despite decent performance, the strategy has its limitations, particularly at times of inflexion points in markets – 2008 was a particularly trying period.
M&G Global Leaders – 2 stars to 1 star
This fund has given disappointing performance over most time periods and stock selection has been weak.
GAM International Growth & Value – 3 stars to 1 star
Following the death of Nils Taube and the retirement of John Hodson, Taube Hodson Stonex (or THS, which GAM acquired earlier this year) is not the same as it once was.
GAM Star GAMCO – 2 stars to 1 star
Legg Mason IF Royce US Smaller Companies – 3 stars to 1 star
Given the manager’s value-leaning, contrarian approach, performance has lagged badly. A recent concentration in cyclical areas has also worked against it. We have higher conviction in T Rowe Price US Smaller Companies Equity and Schroder US Smaller Companies.
For more information on high-quality funds from various fund managers, have a look at Our Top-rated Funds. This is our list of funds that we rate highly and believe have the potential to deliver for you over the long term. You can see it at bestinvest.co.uk/premier-selection – alternatively call 020 7189 2400 or email firstname.lastname@example.org for more information.