We've removed the M&G Recovery Fund from the Wealth 50 list of our favourite funds for new investment.
The fund's been on the Wealth 50 (formerly the Wealth 150) since October 2007 and outperformed the broader UK stock market by 8.5% in its first five years on the list. However, since early 2012, performance has struggled in comparison with the broader UK stock market.
Tom Dobell tries to invest in companies that have fallen upon hard times, but where there is scope for a recovery. This “value” style of investing has largely been out of favour for much of the past decade, so we'd expect some underperformance from Dobell’s fund.
Even the best fund managers go through poor periods, and we're usually happy to support them through weaker periods, providing we retain conviction in their ability to perform well over the long run. But we've started to doubt Tom Dobell's ability to outperform.
In short periods where unloved, value-style companies returned to favour, the fund didn’t do quite as well as we'd have expected, meaning our patience went unrewarded.
Since September 2019, value-style companies have been back in vogue. This boosted the performance of other funds with a similar approach but we're disappointed that the M&G Recovery Fund once again appears to be missing out.
The manager's also increased exposure to early-stage businesses, arguing that their low valuations and future potential justify their positions in the portfolio. The danger is that these smaller investments take up too much of the manager's time and the rest of the portfolio suffers. They're also more difficult to buy and sell (less liquid) than their larger counterparts.
Overall, we feel there are lots of talented fund managers in the UK All-Companies sector and we currently have more conviction in others to deliver stronger performance over the long run. Our favourites can be found on the Wealth 50.
This research note is not personal advice, or a recommendation to make any changes to a portfolio. If you're not sure if an investment is suitable for your circumstances, please seek advice.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Nov 14 -
Nov 15 |
Nov 15 -
Nov 16 |
Nov 16 -
Nov 17 |
Nov 17 -
Nov 18 |
Nov 18 -
Nov 19 |
|
| M&G Recovery | -5.8% | 13.7% | 11.9% | -5.5% | -0.9% |
| FTSE All-Share | 0.6% | 9.8% | 13.4% | -1.5% | 11.0% |
Past performance is not a guide to the future. Source: Lipper IM to 30/11/2019
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