Why do some ‘good’ funds attract so little money?

aroominyork

Sometimes you come across a fund which performs well but attracts little money. For example, Barings Japan Growth Trust. I saw it because I was sorting Japan funds on Trustnet by FE and it has the lowest rating of 76. Over 10 years it was positioned 9/52, over 5 years 15/69, over 3 years 13/75. Its top four holdings are Toyota, Mitsubishi Financial, Nintendo and Sony, so it is not esoteric. But it only holds £26m. Why?

tacpot12

Good question. I agree the fund looks ok, but it's not outstanding in any respect, apart from its low Risk Score (76), but if you read the KIID on the Barings site, it says that OCF is 1.7%, not 1% as shown on Trustnet. I think the data on Trustnet could just be out of date possibly because the fund does not subscribe to Trustnet.

Thrugelmir

aroominyork said:

Sometimes you come across a fund which performs well but attracts little money. For example, Barings Japan Growth Trust. I saw it because I was sorting Japan funds on Trustnet by FE and it has the lowest rating of 76. Over 10 years it was positioned 9/52, over 5 years 15/69, over 3 years 13/75. Its top four holdings are Toyota, Mitsubishi Financial, Nintendo and Sony, so it is not esoteric. But it only holds £26m. Why?

The US has been where the action is. 

aroominyork

tacpot12 said:

Good question. I agree the fund looks ok, but it's not outstanding in any respect, apart from its low Risk Score (76), but if you read the KIID on the Barings site, it says that OCF is 1.7%, not 1% as shown on Trustnet. I think the data on Trustnet could just be out of date possibly because the fund does not subscribe to Trustnet.

Consistently top quartile with low volatility - I call that better than 'good'. 

Barings website shows the Inclusive class (1.7%) - the clean class charges 0.95%.

eskbanker

aroominyork said:
Consistently top quartile with low volatility - I call that better than 'good'.

But the quartile info is only visible retrospectively, and would seem to indicate plenty of competition for investor funds....

aroominyork

I don't understand your point, eskbanker. Quartile info is only visible retrospectively - so? The fund invests in mainstream businesses at the cusp of blend/growth (look at Historical Stock Style) and consistently performs well. Curiously, for a low FE/volatility fund, Morningstar rates its risk Above Average.

Are there additional risks in holding a fund with relatively low amounts of AUM? And on a separate point, it is economically viable to run funds where you only earn about £250k pa of management fees? - that cannot cover costs.

DireEmblem

aroominyork said:

it is economically viable to run funds where you only earn about £250k pa of management fees? - that cannot cover costs.

You could subscribe and help that figure grow?

In all seriousness, it will not be the only fund strategy they run.  It might just be there simply to give the fund manager exposure and a track record, or to complete a set of geographies and provide options for the future.

It depends on how people are looking for funds - the FSSA Japan Focus has a lower OCF, shorter track record(5-6 years), but has consistently performed significantly better.

aroominyork

DireEmblem said:

aroominyork said:

it is economically viable to run funds where you only earn about £250k pa of management fees? - that cannot cover costs.

It depends on how people are looking for funds - the FSSA Japan Focus has a lower OCF, shorter track record(5-6 years), but has consistently performed significantly better.

FSSA has performed better but 1) has a shorter track record, 2) is more volatile, 3) is off-the-charts growth. Yes, investors clearly prefer it to Barings by a factor of 6, but why? Barings seems a steady and well performing fund and it is curious it does not attract more punters. So back to my original question - why?

Eco_Miser

aroominyork said:

 

Are there additional risks in holding a fund with relatively low amounts of AUM? And on a separate point, it is economically viable to run funds where you only earn about £250k pa of management fees? - that cannot cover costs.

I think you just answered your own question. There's an increased risk of the fund being unviable and closing.

csgohan4

Japan hasn't been great for funds over the last 10 years, I've personally invested in a Pacific ex japan for this reason and it is doing well, same as the China fund as well. 

eskbanker

aroominyork said:

I don't understand your point, eskbanker. Quartile info is only visible retrospectively - so?

In the same way that nobody knows how the fund will perform in the future, nobody knows at the time of investing which quartile it'll be in going forward, i.e. it's a lagging indicator.  You seemed surprised that it's not more popular given that it's in the top quartile, but only know that with hindsight - the fact that it's been in the top quartile for a number of years is obviously no guarantee that it'll stay there.