Pundits falter as unit trusts hit hard times

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The Independent Online
The past 12 months brought mostly bad luck to savers who followed the advice of financial experts on where to invest their money.

Our panel, which included accountants, independent financial advisers and stockbrokers, was asked to suggest several funds, ranging from the relatively safe to the risky, that they felt would do well this year.

While some of the funds tipped for 1994 by the Independent's pundits performed extremely well, many others proved to be total duds.

Bad performance was partly due to stock market falls worldwide, affecting even investments previously considered safe, such as gilts and fixed-interest securities. But poor fund selection also played a big role.

David Norton, a fee-charging financial planner at Norton Partners, saw many of the funds he recommended, ranging from US-based technology funds to utility and bond funds, in the top quarter within their investment sectors.

Yet four out of five funds still suffered losses of between 2.97 and 17 per cent. Mr Norton said: "It was a rum year. The funds picked are very sound investments, which would have coped well in a different climate.

"Recommending a few specific funds is always dangerous because my approach centres around a balanced portfolio."

In 1995, Mr Norton suggests holding money in cash funds, some in relatively low-risk investments, index-linked gilts and some in equities.

Brian Tora, chairman of the investment strategy committee at stockbroker Greig Middleton, also had an unhappy year. The five funds he tipped dropped in value - one, an investment trust specialising in China, by up to 46 per cent.

Mr Tora said: "As far as China was concerned, what we have seen in the past year was a big ouflow of American money, which had an impact on the Chinese and Hong Kong markets.

"Nevertheless, China remains the big growth area for the rest of the decade. My advice to investors would be to swallow hard on this one and sit on their hands."

Other funds he chose performed better: Fidelity European Values was down 8 per cent and Hypo F&C's US Smaller Companies dropped 7 per cent. Part of the latter's losses were due to a weakening of the US dollar against the pound.

David Hanrahan, financial services manager at Coole & Haddock, a Sussex-based law firm, picked a mixed bag of funds, with Gartmore's British Growth showing a loss of more than 20 per cent over the year.

However, another of his tips, Morgan Grenfell European Growth, delivered gains of 8 per cent, while his Norwich Property Trust remained roughly level.

Mr Hanrahan said: "There are two lessons to draw from this. One is that investors should be looking over a longer period of, say, three to five years to see how their funds perform.

"The other is that any investment should be spread, with a mixture of risky and safe funds being chosen."

Roddy Kohn, principal of Kohn Cougar, a firm of independent advisers, also had contrasting results.

Beckman International, which invests in gilts and fixed-interest securities, and which Mr Kohn described last year as "a bit hotter than a building society", plummeted in value by more than 25 per cent.

Mr Kohn said: "The Beckman trust is leveraged so that in a rising market gains are enhanced, just as they are exaggerated in a falling one. Every cloud has a silver lining, and this must surely represent an enviable opportunity to buy into the market at a low point. In fact, the fund has risen by 6 per cent since November alone."

He did achieve better results with two of his other tips - but only in the sense that they fell by just 4 per cent and 15 per cent.

However, another tip, John Govett's Mexican Horizons, lived up to his description of it as "spicy". It rocketed upwards in the first three months of the year and still showed a net gain of about 4 per cent at the end of November.

In the past few weeks, problems over inflation, high interest rates and the devaluation of the Mexican peso have led to a spectacular 29 per cent fall in its value.

Mr Kohn said: "I had always said this fund was highly volatile and only for those prepared for a high-risk strategy. And its performance over the year confirms this.

"Investors should take a more philosophical approach and be prepared to sit out both the peaks and the troughs for at least five years."

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