Best and Worst: Broken bonds

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The Independent Online
Broker bonds - funds managed by financial advisers on behalf of their clients - have grown massively in the past few years, despite being expensive and producing poor returns in many cases.

Funds are administered on behalf of brokers by life companies which usually charge a premium of 1 per cent. A further charge, often about 1.5 per cent, is levied by the adviser, and a bid-offer spread of 5 per cent is almost always applied.

Among top performers is Johnson Fry's Worst Performing Fund. Richard Thompson, investment manager, explained: 'Essentially, this is a contra-cyclical fund. What we do is look at the funds managed by one company, M&G, and switch our money into the one that did worst in the previous year.'

Johnson Fry's Compound Growth Portfolio has not fared so well. Simon Steele, who manages it, said: 'The fund was aquired by us some 18 months ago from a broker, Siltala Fund Managers, that went into default. Since then, we have tried to pull things back but, clearly, with investors in it feeling very delicate at what went on before, our investment strategy has had to be conservative.'

Another poor performer, St James Private Managed, is overseen by a Surrey firm, Broker Fund Management. Martin Baker, its investment manager, said: 'This should not really be counted. It has only about pounds 20,000 in it.'

He would not say whose fund it was but added that his company manages about a dozen funds worth some pounds 25m on behalf of a range of brokers - and their performance is good.

----------------------------------------------------------------- BROKER BONDS ----------------------------------------------------------------- The best pounds 1 DFGS No 4. . . . . . . . . . . . . . . . . . 228.58 2 Moneyhill Growth. . . . . . . . . . . . . . .219.01 3 Johnson Fry Worst Performing. . . . . . . . .216.84 4 Swim Aegon. . . . . . . . . . . . . . . . . .214.81 5 Ager Managed. . . . . . . . . . . . . . . . .208.15 The worst 200 Cross Channel Managed. . . . . . . . . . . 107.59 201 Johnson Fry Compound Growth Portfolio. . . 106.99 202 St James Private Managed. . . . . . . . . . 99.39 203 Carr Sheppards Master Portfolio. . . . . . .98.51 204 Brewin Equity. . . . . . . . . . . . . . . .90.35 The chart shows the value at 4 April 1994 of a pounds 100 lump sum that was invested five years ago. ----------------------------------------------------------------- Source: Micropal. -----------------------------------------------------------------

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