Managed funds: Check the pedigree

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Indy Lifestyle Online
Funds will spread your risk but capital growth is not an overnight process, which is why novice investors are usually steered to well-diversified generalist trusts.

Amanda Davidson, a partner with independent financial advisers Holden Meehan, recommends newcomers split their cash, putting half in a broadly- spread UK fund and the rest in an international trust. With this core holding in place, investors can then consider more volatile but potentially more rewarding areas of the market such as smaller companies and emerging markets.

The pedigree of the company managing the fund is crucial. "Check out others in the manager's range to see that they are performing well," Ms Davidson says. "Fund managers can rarely sustain great performance across all their funds but I like to reassure myself that they haven't got just one star performer."

Investment companies tend to have expertise in a particular area of the market and financial advisers may turn to a range of different companies. For example, among European funds, Ms Davidson likes Gartmore, Invesco and Fidelity. "In Asia, we like GT and Schroders. The latter is also good in emerging markets, as are Mercury and Templeton," she says. Fidelity is singled out for its sound performance in most markets: "Fidelity is very good across the board and the size of its operation is very reassuring."

Tracker funds replicating the FTSE 100 index of leading UK shares have dominated the top of the performance tables. Marks & Spencer's 100 Companies tracker fund has made a return of more than 25 per cent over the past year.

But Ms Davidson warns: "Shares in the top five companies in the FTSE 100 went up 50 per cent in value over the past year and that growth is not sustainable."

Information is available from the Association of Investment Trust Companies (0171-431 5222) and the Association of Unit Trusts and Investment Funds (0181-207 1361).

- Juliet Oxborrow

Juliet Oxborrow is editor of `Personal Finance' magazine

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