Not so cautious managed sector lets down investors

Investor faith in one of the UK’s most popular sectors, the Investment Management Association's Cautious Managed sector, has been rewarded with grim returns in the past 12 months, according to fund data analyst Moneyspider.com.

Some of the biggest names in fund management have posted negative returns in a sector ironically intended to calm investor nerves in a volatile investment climate.

Leading funds have lost investors as much as 17 per cent in the past 12 months. A £5,000 investment in the ‘E’ rated New Star Tri-Star fund would now be worth just £4,149.

Another large fund, Foreign & Colonial’s MultiManager Distribution, with £412.58m under investment, has also left investors out of pocket: the fund is down 13.6 per cent, which leaves just £4,401 change from a £5k investment over the past year.

“Our data shows that the average manager in the cautious managed sector has posted minus four per cent returns in the 12 months to the end of May,” said Moneyspider.com’s Tony Ahearne.

“These funds have become the favoured alternative to traditionally ‘safe’ with profits policies and other lower risk asset classes, but in our view the Cautious Managed sector is exhibiting dangerous signs that it is anything but cautious,” he added.

“The basic ethos of most of these funds is that they promise a share of stock market rises while limiting losses from a fall.

“But part of the problem is that there is a huge variety of cautiously managed funds to choose from - ranging from pure bond funds and those that have the traditional cautious-managed mix of 60 per cent equities and 40 per cent bonds to multi-asset funds, which can invest in anything from commodities to swaps, futures and other derivatives.

“Clearly, such a wide investment remit means that some funds are vastly more exposed to higher risk than others – and some of the big name fund managers are getting it spectacularly wrong, as our table of E rated funds shows,” cautioned Ahearne.

“On the plus side, some of the A rated funds have at least generated positive returns: C F Arch’s modest sized fund posted a 7.5 per cent year on year rise, earning around £379 profit on a £5k investment,” he added.

Moneyspider.com is designed to appeal to investors at all levels, is a comprehensive yet easy-to-understand fund monitoring tool delivering personalised reports, including valuations and ratings on each investor’s individual fund, all updated on a daily basis.

Moneyspider.com has no registration fee and the service not only rates the performance of each of the client’s own funds but also shows a comparison with the top five funds in the same sectors. It also shows the top-performing funds from all sectors, so Moneyspider.com investors can see where the real profits have been.

“Keeping a close eye on your fund’s performance is crucial in these uncertain times - in rapidly changing market conditions, as we are currently experiencing, knowing how a specific fund in which you are invested is performing and – equally important – how other funds compare, is simply good financial common sense,” said Ahearne.

Further details on the mechanics of Moneyspider.com can be found at moneyspider.com.