Cautious funds give dismal performance net of fees

Cautious funds give dismal performance net of fees

Investors who remained in cautious funds have fared badly this year, with poor performance across the sector and charges eroding into whatever returns they did make, data has shown.

Analysis carried out by fund data provider FE has reported that only a third of cautious funds managed to avoid losses in 2015.

An analysis of 150 cautious funds showed that only 19 had managed to return in excess of 1 per cent over the year-to-date, while only 46 funds had managed to avoid losses at all this year – giving anything from zero to less than 4 per cent, net of charges.

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Results showed that after charges were taken out, returns were minimal for the majority of funds.

At the top of the table was the £378m Kames Ethical Cautious Managed Fund, managed by Audrey Ryan and Iain Buckle. The fund returned 3.96 per cent overall since the start of the year, net of fees.

This was followed by the SF Cautious Fund, at 3.72 per cent, while JPM Cautious Managed was third with 2.83 per cent according to FE data.

At 45 and 46 respectively were Santander Max 50 per cent Shares Portfolio and Quilter Cheviot Libero Cautious Fund; both had overall returns at zero per cent.

However, these were not the worst performers; at the bottom of the table was Marlborough Defensive Fund, posting a 4.16 per cent loss.

Fund namePerformance YTD to 15 September
Kames Ethical Cautious Managed A Acc3.96%
SF – Cautious TR 3.72%
JPM Cautious Managed2.83%
Barmac – the Castleton Growth Ret Inc 2.78%

Source: FE

Tahmina Mannan, analyst at FE Trustnet, said: “Although our numbers take into consideration the impact of fund management charges on investment returns, those investors looking at a fund provider’s own factsheet should remember to factor in costs and not just look at the performance of a fund.”

The analysis showed that the loss-making performance of the vast majority of cautious funds is bad news for nervous investors who, following a rollercoaster year so far, have sought to reposition portfolios and take a more cautious position.

Rob Askham, UK commercial director at Santander Asset Management, said: “The fund is aimed at long-term investors and is designed to deliver attractive risk-adjusted returns over a business cycle, which we have delivered.

“Over three years the fund has returned 16.9 per cent and over five years this rises to 30.4 per cent. It is not aimed at investors with a short-term time horizon. However, even over one year it has performed within the second quartile of its peer group.”

Adviser view

Ross Yiend, IFA from London-based Plutus Wealth Management, said: “People are attracted to cautions funds because they are more interested in losing less than gaining more. But if the total fund charge is outstripping the return, the fund is not doing a good job and the client might as well keep cash.

“Other financial advisers should make sure the funds are fully assessed and ensure the client gets value for money on the actively managed fund. Otherwise the client the might as well hold cash as it’s less risky.”