Emerging market funds most disappointing - Deficient 50 June 14 update

Global emerging market (GEM) funds dominate the top of Money Observer's Deficient 50 list, which highlights funds that have consistently disappointed investors with fourth quartile returns over each of the past three years compared to their peer group.

Funds from the UK all companies sectors populate the bottom of the table, however with more than 230 qualifying funds it is not unusual to find a higher number of consistently poor performers compared with other sectors with fewer constituents.

The Deficient 50 is the antithesis of Money Observer's regular Consistent 50 analysis, which highlights consistently top-performing funds on a quarterly basis. The Deficient 50 ranks funds with the poorest three-year return at the top of the table.

In the three years to 1 June, GEM funds performed exceptionally poorly, with four of the 10 worst performers invested in the region.

mass sell-offs

The persistently worst GEM performer is FP HEXAM Global Emerging Markets, managed by founding partner of the boutique firm Bryan Collings, which has lost nearly 38 per cent in the three years to 1 June compared to a loss of nearly 6 per cent from the IMA global emerging markets sector.

The second worst performer in the region and the fifth poorest overall is Templeton Global Emerging Markets, managed by Dr. Mark Mobius, which lost 28 per cent in the three years to 1 June, although the fund's performance has picked up significantly year to date.

In contrast, Money Observer Rated Fund Templeton Emerging Markets Investment Trust, also managed by Mobius, has lost a slightly more palatable 11.7 per cent for investors.

Emerging markets suffered particularly from the mass sell-offs seen in June 2013 and January 2014 following the US Federal Reserve's announcement that it would begin tapering its quantitative easing programme, which had helped to bolster emerging markets since 2009.

A number of global funds also performed poorly in the three years to 1 June, with seven of the 20 most disappointing funds residing in the sector. The worst global performer is First State Global Resources, which is also the second worst performer overall with a loss of nearly 36 per cent compared to a gain of 22 per cent for the IMA global sector.

As a natural resources specialist the First State fund's performance is unsurprising as negative sentiment and falling share prices continue to hound natural resource stocks. Like Templeton Global Emerging Markets, however, the fund has improved year to date, returning nearly 10 per cent since 1 January and making it the third best performer in a sector consisting of over 250 funds.

The fourth worst-performing fund overall is SVM Global Opportunities, managed by Colin McLean, which over three years has lost nearly 30 per cent. As a global generalist this performance is unusual, however, with assets under management of only £3.5 million, the fund's diminishing size (the fund has shrunk from £33.5 million in July 2011) may have been a factor.

Indeed SVM has announced the fund will be 'merged' into the firm's much larger World Equity fund, managed by Neil Veitch, as Global Opportunities is 'no longer commercially viable'.

uk funds

While GEM and global funds disappointed the most, the UK did not escape unscathed. The worst performer overall was a UK smaller companies fund, SF Webb Capital Smaller Companies Growth, which lost nearly 59 per cent in the three years to 1 June compared to a gain of 47 per cent in the IMA UK smaller companies sector.

This fund, previously run by Tom Winnifrith and named SF T1PS Smaller Companies Growth, was taken over by smaller companies fund manager Peter Webb in mid 2012, since when it has continued to underperform the sector.

The second worst-performing fund in the sector is TM Progressive UK Smaller Companies, which has returned 24 per cent in the same period, underlining the huge disparity between SF Webb's performance and that of the sector as a whole.

Of those UK funds sitting at the bottom of the Deficient 50 table, the most disappointing was Scottish Widows Investment Partnership (SWIP) UK Opportunities, which eked out a 1 per cent return in the three years to 1 June compared to a gain of 33 per cent from the IMA UK all companies sector.

This was followed by F&C UK Alpha, Scottish Widows UK Select Growth, FF&P Concentrated UK Equity, Scottish Widows HIFML Special Situations and Halifax Special Situations, all of which achieved returns of less than 5 per cent over three years.

Multi-asset funds also fared poorly with a number of high-profile funds from asset managers including Schroder, Legal and General and again, Scottish Widows, bringing home returns of less than 10 per cent in the three years to 1 June.

Money Observer Deficient 50
RankFundSectorReturn on £100 in three years to 1 June
1SF Webb Smaller CompaniesUK Smaller Companies41.76
2First State Global ResourcesGlobal64.89
3FP HEXAM Global Emerging MarketsGlobal Emerging Markets65.03
4SVM Global OpportunitiesGlobal70.35
5Templeton Global Emerging MarketsGlobal Emerging Markets73.02
6HC FCM Salamanca Global PropertyProperty76.55
7Neptune Emerging MarketsGlobal Emerging Markets79.65
8Lazard Developing MarketsGlobal Emerging Markets
9CF Richmond Multi AssetTargeted Absolute Return84.71
10HSBC Asian GrowthAsia Pacific Excluding Japan87.15
11Absolute Asia AM Pacific Rim EquitiesAsia Pacific Excluding Japan89.45
12CF Lacomp WorldGlobal91.58
13Newton OrientalAsia Pacific Excluding Japan92.53
14M&G Global BasicsGlobal93.64
15Neptune Global Special SituationsGlobal95.81
16PFS Taube GlobalGlobal97.14
17M&G Managed GrowthFlexible Investment97.89
18FP Distinction Diversified Real ReturnMixed Investment 20-60% Shares98.61
19Neptune Global EquityGlobal100
20Legal & General Multi Manager GrowthFlexible Investment100.53
21SWIP UK OpportunitiesUK All Companies101
22F&C UK AlphaUK All Companies101.32
23Aviva Investors Diversified StrategyMixed Investment 20-60% Shares101.34
24Scottish Widows UK Select GrowthUK All Companies101.99
25First State Global AgribusinessGlobal102.36
26Skagen Kon-TikiGlobal102.38
27FF&P Concentrated UK EquityUK All Companies102.95
28Schroder Multi-Manager Cautious ManagedMixed Investment 20-60% Shares104.22
29Legal & General Multi-Manager BalancedMixed Investment 40-85% Shares104.44
30Scottish Widows HIFML Special SituationsUK All Companies104.63
31Halifax Special SituationsUK All Companies104.76
32Fidelity JapanJapan104.81
33Scottish Widows HIFML Diversified IncomeMixed Investment 20-60% Shares104.82
34Legg Mason Global Blue Chip Bond£ Corporate Bond104.98
35CF KB Endeavour Multi-Asset BalancedMixed Investment 40-85% Shares106.13
36Schroder Multi-Manager Strategic BalancedMixed Investment 40-85% Shares108.12
37St James's Place Investment Grade Corporate Bond£ Corporate Bond108.34
38BlackRock Global EquityGlobal108.41
39Investec AmericanNorth America109.47
40WAY MA Cautious PortfolioMixed Investment 20-60% Shares110.02
41SWIP Multi-Manager Optimal Multi AssetMixed Investment 40-85% Shares110.7
42Cavendish North AmericanNorth America116.39
43SWIP UK IncomeUK Equity Income118.58
44Scottish Widows HIFML UK EquityUK Equity Income118.68
45CF IM UK GrowthUK All Companies118.8
46Halifax UK Equity IncomeUK Equity Income118.87
47SF Delmore Growth & IncomeUK All Companies119.25
48Scottish Widows UK Equity IncomeUK Equity Income119.73
49CF IM Capital UK Equity & Bond IncomeUK Equity & Bond Income120.04
50Scottish Widows HIFML UK High IncomeUK Equity Income120.06
Notes: The Deficient 50 funds have three consecutive years of fourth-quartile performance in their respective sectors, and are ranked by their three-year performance (worst at the top) to 1 June 2014, with net income reinvested. Funds in the following IMA sectors are not included in the ranking: Specialist, short-term money market money market and protected. Source: Lipper as at 1 June 2014.

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