The best ideas concept was launched by Skandia (subsequently acquired by Old Mutual) in June 2006. Its aim is to provide exposure to some of the most highly-regarded fund managers in the industry, with each manager contributing up to ten of their highest conviction ideas to the portfolio.
At the time most of these managers were already represented on our Wealth 150. We felt the best ideas concept would be an excellent way for investors to access their talents. As a result, we had high hopes for the fund.
Performance has not lived up to our expectations, while the fund has undergone changes which do not appear to have benefited investors. In December 2012 the fund moved from having approximately 50% allocated to the UK and 50% overseas to having around a third invested in North America, a third in Europe (including UK) and a third in higher-risk Asian and emerging markets.
This means since the changes have been made, and when compared with the benchmark MSCI AC World Index, the fund has had a much lower weighting to the US (one of the best performing global stock markets over recent years) and higher exposure to Asia and higher risk emerging markets (which have performed less well). This has presented a significant headwind for the fund. Since December 2012 the fund has grown by 29.8% compared with 40.8% for the MSCI AC World Index and 34.1% for the average fund in the IA Global Sector although past performance should not be seen as an indicator of future returns.
Since Lee Freeman-Shor assumed responsibility for the fund in January 2010 he has done a reasonable job. However, given the track record and pedigree of the underlying managers, we would have expected stock selection to have a more positive impact on returns. This leads us to believe that the 10 stock best ideas concept is not necessarily the best way for investors to access the underlying managers' stock picking abilities. Overall, the fund has underperformed the MSCI AC World Index since launch, as shown below, while it has also been more volatile than the peer group and index. Derivatives can be used by the managers which can accordingly increase risk.
Performance since launch
|Annual percentage growth|
| Feb 10 -
| Feb 11 -
| Feb 12 -
| Feb 13 -
| Feb 14 -
|Old Mutual Global Best Ideas||30.16%||-6.59%||17.83%||9.36%||9.36%|
|MSCI AC World||19.31%||-1.45%||15.66%||6.66%||19.60%|
We stress this should not be taken as a signal to make any changes to a portfolio - investors should make their own decisions about whether or not a fund remains suitable for their personal objectives. The fund continues to provide exposure to a number of high-quality managers. That said, for the reasons outlined above, we have higher conviction in the remaining Wealth 150 funds. Investors looking to invest new money into the global sector might wish to refer to the Wealth 150. We offer an advisory service for investors who are unsure of the suitability of an investment.
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