InvestmentsAug 24 2017

Hargreaves Lansdown drops tech funds from Wealth 150 list

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Hargreaves Lansdown drops tech funds from Wealth 150 list
ByDavid Thorpe

Actively managed technology funds are likely to continue to struggle to outperform passives, according to Hargreaves Lansdown’s Mark Dampier, as the company removed technology and telecoms funds from its Wealth 150 best-buy list.

Mr Dampier said the dominance of a small number of technology stocks, such as Facebook and Amazon, on global markets means it is, and in his view will continue to be, difficult for active fund managers in the technology arena to outperform any index or passive strategy in a way that adds sufficient extra value for investors to justify the extra charges.

While the shunning of actively managed technology funds is a new departure for the Wealth 150, Mr. Dampier said the list has long been without an actively managed US equity fund.

He said he doubted Hargreaves Lansdown’s best buy list would “ever again” have a favourite actively managed US equity fund.

The analyst said: “The US stock market is the largest and most heavily researched in the world, and this is one of the main reasons we believe we have had difficulty finding active managers who consistently outperform. We therefore currently prefer a low-cost tracker fund for exposure to larger US companies.” 

The Wealth 150 list does not include any investment trusts, with Mr Dampier once saying such funds are “not for the common man.”

Tim Pigotts, managing director at Pigotts Investments in Dorking, said he prefers to invest in technology funds through buying one of the three listed technology trusts on the UK market.

He added he gets exposure to US stocks through US actively managed investment trusts.

In general, Mr Dampier prefers actively managed funds to passives. He commented that because of fees, passive funds actually return less than the market.

Mr Dampier said since the Wealth 150 was launched in 2003, the average FTSE All Share tracker has returned 28 per cent less than the index it tracks, due to fees.

The fund picker said: “When the Wealth 150 was born in 2003, I thought we would probably expand the number of funds on the list over time. However, while the number of funds available to UK investors has undoubtedly increased, the number of Wealth 150 funds has actually shrunk.

"That’s because there’s only a limited pool of talented managers with proven track records out there, and we believe that managers who outperform are lucky until proven skilful.”