Halifax UK Growth and other dog funds
If you invest in the Halifax UK Growth fund you may want to think again.
It joins 40 other investment funds that have seriously underperformed their benchmarks over the last three years according to Bestinvest’s latest ‘Spot the Dog’ report.
Halifax may be a well-known brand on the high street and suitable for your day to day banking but when it comes to investing for your future, you want better.
What makes the Halifax UK Growth fund a dog fund
The Spot the Dog report is published by Bestinvest every year and looks at the universe of UK based open ended investment companies (OEICs) and unit trusts. The type of funds that can be used in your workplace pension and ISA savings.
It looks across funds investing in various geographical locations including the likes of North America, Europe, UK and Asia Pacific.
Each of these areas will have a benchmark. A fund is classed as a dog fund if it fails to beat its benchmark over three consecutive 12 month periods and underperformed the benchmark by more than 5% over the entire three year period of analysis.
The Halifax UK Growth fund sits in the UK All Companies category meaning the fund invests mainly in UK listed companies.
It has delivered negative returns in three of the last five years. It has also underperformed the benchmark by more than 10% over the last three years.
The Halifax UK Growth fund is not the only culprit though. There are other big names throughout the report that are shown as dog funds. The likes of Invesco, Ninety One, Scottish Widows and Fidelity all appear.
What really hurts is that you are paying these investment managers to invest your money and it turns out you could have just bought a tracker fund at a much lower cost which would have done better.
Shockingly, there is over £19billion invested in these dog funds with over £3billion invested in the Halifax UK Growth fund alone.
Why the likes of the Halifax UK Growth fund underperform
Funds that invest into one geographical area are restricted in what they can invest in.
The Halifax UK Growth fund for example can only invest in UK listed companies. It’s top ten holdings include the likes of Shell, BP, AstraZeneca and Rio Tinto. These are big UK companies that have been around for ages and will tick along, but is there big prospects for growth from them in the future? Are they businesses in sectors like artificial intelligence and the internet of things where all the growth is going to come from in the future?
There is not much skill a UK focused investment manager can add especially when managing a large fund like the Halifax UK Growth fund. The UK only has so many companies listed and when you have lots of money to invest you have to buy into the biggest companies.
For a lot of the funds listed as dog funds there is no focus on environmental factors. They do not filter their investments on any ethical, social or governance ratings. This may not sit right with you if you want your investments to make you money and do right at the same time.
History tells us that over the longer term greater returns can be found by investing in smaller companies in sectors that are new and going to be a big part of our lifestyle in the future.
Think different ways of travelling, new sources of energy, medicine combating aging and automation. It’s all coming and now is the time to invest in your future.
Don’t let a lazy boring investment manager profit from your savings. Make sure your savings have the best chance of delivering great returns for you and the environment.
Carl Roberts, director
The Fund is authorised in the United Kingdom and regulated by the Financial Conduct Authority (FCA) Firm Reference Number:754570.
If you’re interested in learning more about this topic, I encourage you to check out the resource I’ve linked below.Minerva Money Management
More information about the fund can be found here. Hargreaves Lansdown or AJ Bell
Risk warnings
The value of investments and the income derived from them may fall as well as rise. You may not get back what you invest. This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action. All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs practice. Levels and bases of tax relief are subject to change. This blog is based on my own observations and opinions.
