Unhelpful headlines fuelling short term thinking

Today I read a particularly unhelpful headline article in the trade press: ‘The 7 UK equity funds halving the FTSE’s losses during the pandemic.’ I imagine it will only be a matter of time before this info will find its way into mainstream media leading to some investors asking their adviser ‘Why am I not in these funds?’

But why ruin a good headline?

Hopefully most investors will have been well educated by their adviser to take a longer term view on equity investing. A lot longer than 3 months! The article failed to mention these funds longer term performance, but did highlight the type of remit that they were tasked with, and unsurprisingly, none of them were what could be deemed ‘mainstream.’

Fund 1 is actually up 6% thanks largely to a 71% weighting in AIM shares. Hardly fair to be compared to the FTSE 100

Fund 2 is a Long/short fund so its short position will have certainly benefitted from the market falls

Fund 3 can invest up to 70% in global stocks( and has a 7% initial entry charge, something no self respecting wealth manager should be advocating their clients to pay.)

Fund 4 is a micro cap fund and has benefited from high exposure to areas which the Governments Covid fiscal response is addressing, such as infrastructure and R&D which it was holding before Covid struck. Therefore the return should be deemed more luck than judgement!

Fund 5 is a multi cap fund and it’s difficult to argue that it’s not done a good relative job. A diamond in the rough.

Fund 7 is a small cap fund of just £5.1m which means it is vulnerable to closure as one wonders quite how it is financially sustainable (I confess to having never heard of the fund house)

I have missed out Fund 6 for a reason. It’s a Sustainable fund. It is benchmarked against the FTSE Allshare but ‘will only invest in shares that actively make a positive contribution to society’

Is this short term performance a flash in the pan? Data from Morningstar would suggest otherwise. Over the past ten years it has nearly trebled the return from the FTSE Allshare. The evidence continues to mount that investing in funds that are targeting companies that are looking to make a Social impact are good for your financial health. But perhaps you feel it’s the right thing to do anyway? We would endorse that, and be delighted to advise you.