When it comes to selecting top-performing investment funds and unit trusts the bigger brand is not necessarily better. Choosing the wrong fund by investing with big brand fund managers could cost investors dearly.
Many investors are deluded into thinking that buying from a big brand fund manager will in some way protect them against selecting a poorly performing fund. The big brand managers offer many great funds, but they're also marketing plenty of duds. Just because one fund is a top performer, doesn't mean it applies across that fund manager's range. Investors need to look beyond the brand and more closely at the underlying fund.
Over recent years, the UK market has seen a rise in popularity for boutique investment houses, and, given their track record of consistent positive performance, it's hardly surprising. There are many ways to classify a boutique, but generally speaking, boutique fund managers are independently-owned or employee-owned, and relatively small in size. They often invest in specialist areas of expertise, rather than attempt to be all things to all men and run funds across each and every sector.
The popularity of boutique investment managers has actually surpassed some of the big brand names in the UK. In a head-to-head competition on performance, boutiques won. Last year, the following boutiques took the top 4 spots: Rathbone, Neptune, Artemis, and Dalton. At the same time, big brand names like Standard Life and UBS fell in their rankings.
The last quarter of 2006 was hair-raising for investors, as millions were wiped off share prices and markets. However, the boutique fund management houses continued to outperform their larger rivals.
The disappointing reality for most private investors is that neither they, nor in some cases their financial advisers, have ever heard of some of these relatively unknown smaller investment houses, and are therefore missing out on great investment opportunities.
In addition to people investing in a fund because of the company that manages the fund, another huge mistake is to invest in a fund because of the fund manager. Many investors are so ignorant about investing that they look at a fund managers star rankings and invest in a fund based on that alone. How a fund manager did 2 years ago has absolutely nothing to do with how he will perform next year!
Did you know that only 15% of fund managers have run the same fund for 6 years? So why invest in a fund for 10, 15, or 25 years and more based on the guy who is managing the fund when statistics show he will only be there for 6 years?
In investment terms, familiarity does not always necessarily breed content. Investors should monitor their investments very closely and ensure that they have the tools at hand to spot strong investment opportunities that would otherwise pass them by.
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