When to change an underperforming fund?

[simong800]

Hi All,

I was after some advice on when to sell a holding in an underperforming fund/replace with another, and wondered if anyone can offer any guidance.

Background summary is I am invested in 12 funds within an ISA, drip feeding between £1k to £2k a month into various funds broken down to give me a diverse spread in terms of global coverage. 25-30 year investment timeframe, started about 3 years ago. It isn't money I envisage needing (touch wood) so is a case of saving for my future and if one day I have kids etc helping their future too.

I have 1 fund in particular that is causing me to scratch my head a little, Woodford UK Equity Income.

This is up 0.22% since I started investing in it, whilst others in the portfolio are up anywhere from 6% to 56%.

Over 3 months, 6 months, 1 year and 3 years Trustnet tells me this fund is placed 87/87, 86/86, 84/84 and 64/79 compared to others in its sector (IA UK Equity Income).

I bought into this fund off the back of Woodfords reputation, and admittedly to some extent Hargreaves Lansdown's promotion of it at the time when starting out. His track record at Invesco was superb, however this seems to be performing quite badly compared to the competition.

Whilst appreciative I am in for a long term investment and one shouldn't look at the short term performance, even the past 3 years as a whole isn't exactly promising.

Would I be accused of being too reactive to shift this holding (circa 9% of the entire portfolio) into another UK Equity Income fund or is the time right to change?

[simong800]

Thanks chaps, yep I had followed this and some of the gambles that didn't pay off! The Jupiter news was interesting too.

Is it normal for a manager to underperform in this way for a period of time? And is the press that goes with it normal? I haven't really seen so much hype around one manager (for example I couldn't tell you who manages Neptune Russia) so wouldn't know if this is just something that happens, if the performance of Woodford is SO bad it is gaining press, or if it is a classic case of the press liking to build someone up then kick them down.....

[simong800]

Derek Chevalier said:

Out of interest why did you go for a handful of active funds rather than a global tracker?

Some of the funds were a a bit specialist, i.e. emerging markets fund where I felt a fund manager could seek good value/get better returns, also a property fund investing in commercial properties (bricks and mortar, to scratch an itch without getting into buy to let) and so on.

In hindsight a tracker would clearly have outperformed a couple of my choices, without doubt!

Edit to add this very question has inspired me to do some reading on active vs passive again and see if the advice found is the same as 3-4 years ago when I first started looking.....

Edited by si800 on Friday 20th October 21:07