Standard Life UK Equity High Income Fund Retail Accumulation Units

nxdmsandkaskdjaqd

I would appreciate some thoughts on this fund, being new to this I have given consideration to my analysis, but would appreciate your thoughts and to see if I am on the right track.

Over the last 5 years the fund appears to have done well, outperforming the benchmark, but in the last 4 months the situation has reversed and is now about 5% below.

http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=STUEHI&univ=U&pagetype=performance

I see from the fund analysis provided by Trustnet that it currently ranks 111 out of 111 in the Quartiles Table:

http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=STUEHI&univ=U&pagetype=overview

Interesting the Aberdeen UK Equity Income fund ranks 10 out of 111, has no BP shares, has outperformed the benchmark and is up 12.8% on the year.

http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=KZF83&univ=U

I wondered if the last 4 months performance might be directly as a result of the BP Gulf Oil disaster which this fund has a 6% stake in?

Am I correct in that this is now a poor performing fund?

turbobob

"Am I correct in that this is now a poor performing fund?" - well its subjective and you have to consider performance over the long term. But purely looking at the numbers yes, it is the worst performing fund in its sector over one year, and a mediocre performer over 3 years. The graphs suggest it was outperforming until recently.

Yes the BP spill would have delivered a heavy blow to the fund . Looking at the historical portfolio on Trustnet, I can see that in March, BP made up 8.7% of the fund. We all know what's happened to BP's share price since then.. It also has in its top holdings things like Xstrata and Rio Tinto (mining companies) which surprises me for an income fund as they pay little in the way of dividends. These companies tend to be volatile and have fallen a lot faster than the market as a whole since the European sovereign debt crisis etc. I'd probably look at something else if I was looking for an income fund

dunstonh

You need to look at the timing and the assets it holds. Not all funds are the same risk or invested the same way. What has made this fund perform well in growth periods but bad during negative periods? Often the level of risk a fund takes will dictate that (generically, high risk funds go up more in growth periods and down more in loss periods).

nxdmsandkaskdjaqd

Thank you both for your replies. Not sure what to do next.

I was recommended this fund by Edward Jones and hence have held this fund for some time. As I begin to understand more about this investment area I wonder why the worst performing fund in its sector over one year, and a mediocre performer over 3 years was ever recommended to me.

I am fairly confident in my own mind that the reason, looking at the assets and timing, is that this is in mostly due to BP. But other things were going on at that time, but this would have, and did, affect all the other stocks.

Whilst I am only 5% down at the moment, would it be a sensible option for me to more to a better performing fund such as the Aberdeen UK Equity Income, or should I stick with it for the long term? If the differential between the benchmark and Aberdeen continues, then over the next year I could recover my current loss!


I have no need for the Income so would therefore go with Accumulation.

turbobob

nxdmsandkaskdjaqd wrote: »

I was recommended this fund by Edward Jones and hence have held this fund for some time. As I begin to understand more about this investment area I wonder why the worst performing fund in its sector over one year, and a mediocre performer over 3 years was ever recommended to me.

I am fairly confident in my own mind that the reason, looking at the assets and timing, is that this is in mostly due to BP. But other things were going on at that time, but this would have, and did, affect all the other stocks.

I doubt it was the worst performing fund in its sector when it was recommended and financial advisers don't have crystal balls. Like the rest of us they have to make decisions based on what looks reasonable at the time without the benefit of hindsight.

If this fund was a small part of a larger selection then I don't see the problem. If you are no longer happy with it, change it for something else! Don't be tempted to chase performance though - you only know what's performed best in a particular time period after the event. If its the only fund you hold then that suggests the adviser didn't do a very good job and it means your portfolio is not diverse enough.

Yes it looks like it's faired badly recently mainly due to its high exposure to BP, and also the growth stocks (Xstrata etc.) would have helped performance until about May this year, and hurt it since.

nxdmsandkaskdjaqd

turbobob
Thanks for putting the situation into perspective, it is 14% of the overall fund that has grown around 12% on the year. I must admit that I am tempted to chase the best performing funds, then switch when they don't perform. Why is this approach not right?

Another thing, why do Fund Mangers not ditch a fund when something goes 'belly-up' (Bp for example) and move onto something that performs better?

dunstonh

I must admit that I am tempted to chase the best performing funds, then switch when they don't perform. Why is this approach not right?

because you dont know what fund is going to be best in the next "period". Often it is the ones that have been poor in the previous period (as a price rebounds or the extra risk they took that didnt pay off during that period does is in the next).

Another thing, why do Fund Mangers not ditch a fund when something goes 'belly-up' (Bp for example) and move onto something that performs better?

If you sold every time something went down in price you would just end up chasing losses. BP is fundamentally a strong company and the share price was over sold. If the fund managers sold it at 308 a share they would have missed out on the bounce that took it to 432 and more recently performing in line with the general markets. The period when it bounced from 308 to 432 saw it outperform the market.

Sector allocation is far more important to returns than individual fund choice.