Naughtiest funds? Or hidden gems?
Brian Dennehy
Identifying the naughtiest (worst performing) funds of the noughties is not (just) about poking fun. I believe it can also help you identify areas of deep value, that is funds or sectors which might be the gems of the next decade, but which are being overlooked - one sector stands out in this regard.
CLICK HERE for the definitive guide to the naughtiest funds.
As you will see, we also show the performance over 1 and 5 years, with the quartile ranking in the context of the whole universe of funds, not just this twenty. So at a glance you can see if there has been any relative improvement.
Japan stands out as a dog of a sector for the decade, followed by technology. And outside this top twenty there is a growing list of US funds.
One lesson looking at this list is not to buy faddish funds, or those which are simply too narrow in focus. The tech funds certainly fall into this category, and attracted vast sums in the years leading up to 2001 - although Japan funds dominates this list in number, the total amount invested into these is quite limited. The more eccentric McHattie and Manek funds are also of the too faddish or narrow variety. There are no redeeming features for any of these and those that still hold them should sell, and work on building a more rational portfolio.
But what about the Japanese funds and, to a lesser extent, the US funds? As the largest and third biggest economies in the world should we also write them off for the next decade? These are not fringe sectors.
What would excite us is if we could see evidence of deep value. On this basis we can quickly write off the US – on no criteria is there deep value in the US. Some might argue fair value, and a vociferous minority argue over-valuation.
Japan is different. We look at the opportunity in the upcoming analysis, “Trade for the decade” which will be published on Friday. It is an obvious call to chase emerging markets - but it is seldom the obvious which makes the best investment.
Date: 07.01.2010