InvestmentsOct 29 2014

Promotion of star managers a ‘fad diet’ bad for returns: Sensible Investing TV

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The promotion of ‘star’ funds and managers promoted by platforms and the media is a “fad diet” that is bad for investors’ long-term financial health, the producer of Sensible Investing TV has said.

Robin Powell, who set up Sensible Investing to promote the benefits of a long-term, low-cost investment strategy, said: “To invest sensibly, one should keep costs as low as possible, diversify as much as possible, to rebalance as required but otherwise to do absolutely nothing.

“These funds that the media love to talk about and the platforms love to promote is the fad diet of the investment world. They attract media attention and make money for those who peddle them but they almost invariably do not deliver anything like the results that they promise.”

He said the industry needed investors to switch off to this constant advertising. Mr Powell said: “About the worst thing any investor can do is to build a portfolio around funds that have strong recent performance.

“But the fund supermarkets and the media love to produce these tables that give the investor a false sense of security. The bigger the brand, the higher the cost and the worse the performance as a result of those costs.”

His comments came as he unveiled his documentary: How to Win the Loser’s Game, an 80-minute programme that he said “lifts the lid” on the high costs imposed on pension funds by managers ,causing savers to lose “up to half the returns they make in charges”.

Adviser view

Laurence Sanderson, financial consultant at Essex-based Sterling and Law, said: “If getting decent value for money then there is nothing wrong with high charges; cheap is not necessary best.

“You can also invest in multi-manager funds to take out downside risk, so I cannot see a problem paying for a good fund. It can be resolved in the advice process – generally, if a fund is performing well, it will do in the future. If it does not perform well, you review and move it elsewhere.”