Should I stick with this ISA fund?

Hi everyone,
I been having thoughts of switching ISA funds from Lindsell Train Global Equity Fund Class B. This is due to it's poor performance since Covid.I pay into this monthly as a savings pot for my daughter and will continue this for at least the next 10 years.
Any and all advice would be very appreciated

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  • Janie2008Janie2008 Forumite
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    I have some money in this one as well. I've just been checking. I have a range of funds and it's not been a very good year all round. I don't know how much you save but you could maybe put money into a couple of funds or move some of the capital into another fund so you don't have all your money in one fund.
  • MX5huggyMX5huggy Forumite
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    I wouldn’t have it, but I’m all aboard the passive train, a Developed World tracker would perform similarly and only cost 0.1 to 0.15%. Some say diversify across a rang of funds then you end up with basically a global tracker at 4 times the cost. 

    Sell the lot and buy the tracker, then performance is not due to your choices but the markets. 
  • edited 20 December 2022 at 11:00AM
    ColdIronColdIron Forumite
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    edited 20 December 2022 at 11:00AM
    A difficult call. It did well when we were in a period that benefited growth funds (like Fundsmith, SMT etc) and could have its day in the sun again if we switch back to a lower interest rate environment. You could crystallise your losses and hope to find something better (but unlikely to match its previous performance) or carry on knowing you are buying heavily discounted units
    It doesn't have to be all or nothing and time is on your side
  • dunstonhdunstonh Forumite
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    Funds that have a particular investment style will not work every single year of an economic cycle.   Investment styles change throughout the cycle.  Sometimes favouring value.  Sometimes favouring growth.   Managed funds often have that focus and will do better in periods where they are the right place to be at the right time but worse in periods where the other styles are favoured.

    Passive funds don't focus (bar a few exceptions) on a particular investment style.  You get what the market they are tracking does.  Whether it's good, bad or indifferent.     This can mean that with managed funds, you need to switch them around more frequently.  However, timing that switch is notoriously difficult, if not impossible as you need hindsight to know when to do it. i.e. its easy to look back and see when the best point was but impossible to in advance when that point is.

    So, sticking with passive funds is often best.  Or a hybrid approach of core (passive) and satellite (managed).
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • JohnWinderJohnWinder Forumite
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    It doesn’t look like a bad fund with some diversification in countries at least, but mostly large, growth companies which is a particular segment of the stock market as a whole.

    One concern might be fees. You’re paying about 0.4%/year more than you might with a comparable cheaper fund. Get out your compound interest calculator! In investment fund investing, unlike most other aspects of spending, you get what you don’t pay for with investment funds. Morningstar research finds that fees are the best single predictor of how well you will do out of two or more comparable funds; the lower the fees the better you’ll do.

    Another concern is that this is an actively managed fund. If you missed the news out of the last 30 years is that such funds almost always can’t do as well for you as a passive tracker. Hard to believe (a lot of people can’t, or won’t admit to it) but it seems pretty certain. Yours might be one of the lucky ones that keeps performing well as it has in comparison, but it’s taking a bet you don’t need to. You can get the returns of the stock market (are you entitled to any more by investing?) brainlessly with a tracker, and you never need to worry about last years return (unless it’s to suggest to you that you need to invest more (or less) to reach your target.

    As to performance since the pandemic, try not to pay much attention to past performance because somewhat concentrated funds like this (they say themselves that it’s concentrated in holding relatively few stocks) have periods of years when they shine compared to other funds only to be followed by periods when they’re shaded by others. There’s good evidence that outperformance for several years, compared to comparable funds, is commonly followed by years of being outshone. By that measure, the time to get out would be when they’re on a high, not on a low. Secondly, a use to make of performance data is to examine why it is so, in this case it might be because growth stocks have taken a hammering recently and now it’s the turn of ‘value’ stocks to shine. Your fund is zero on ‘value’ stocks. It’s bad for you (or me) to chop and change our funds  because of ‘bad performance’ when this sort of thing is happening, and the research suggests that it costs investors about 1.7%/year in lost returns compared with sticking with their choice through thick and thin; it’s called ‘mind the gap’ research, the gap between what the fund returns when left alone and what the fund returns those who invest in it (many of whom can’t stay the course). 

    Use an online compound interest calculator to get a clearer picture. Enter the present value of your fund, how much you add each year and assume an increase of 4%/year to see its value in 10 years if the costs can be reduced by 0.5%/year (giving and increase of 4.5%/year instead of 4%.

  • LintonLinton Forumite
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    Looking at its long term graph over the past 10 years your fund has provided above average returns beating both global index based passive funds and other well known funds like Vanguard Life Strategy 100.   It holds less tech shares than many funds and higher consumer defensive shares (eg Diageo and Heineken) which suffered during the Covid lockdowns.  But since the start of this year it has performed slightly better than the index funds.

    I see no reason to change the fund.  It won't follow the indexes, possibly better possibly worse, but its investments arent of the type that may boom and bust.
  • NoviceInvestor1NoviceInvestor1 Forumite
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    Curious timing on this - it's been one of the best funds in it's category this year according to Morningstar? (Large Cap Growth) Contrarily it was poor in 2019, so before Covid.



    The question is do you want to bet on growth funds in the current and potential future climate? Whether it did well or not 10 years ago is neither here nor there - the market we have today (and for the next 10) is vastly different to the last 10.

    My own take is that a lot of quality growth stocks rerated upwards as interest rates rerated downward. This year the opposite has occurred but the fund is still expensive compared to the MSCI ACWI . I wouldn't want to make a bet on future direction of travel either for interest rates, or for the small subset of the global stock market that funds like this buy. 
  • LintonLinton Forumite
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    Lindsay Trains Global Equity's performance in 2019 was not poor - it provided a return of 19%.  It was however poorer than those funds with a higher tech allocation.  That tech boom has unwound this year, hence the fund's higher performance.  So its more a sign of generally lower volatility.
  • edited 20 December 2022 at 12:22PM
    NoviceInvestor1NoviceInvestor1 Forumite
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    edited 20 December 2022 at 12:22PM
    Linton said:
    Lindsay Trains Global Equity's performance in 2019 was not poor - it provided a return of 19%.  It was however poorer than those funds with a higher tech allocation.  That tech boom has unwound this year, hence the fund's higher performance.  So its more a sign of generally lower volatility.
    Funds should be assessed against a suitable benchmark to help investors see whether the performance is driven simply by a factor bet, or stock picking.

    LTGE may well have returned 19%, but that is less than the average fund in it's category, and the index that Morningstar deem suitable. It is also less than the MSCI ACWI (23%) and importantly the MSCI World Quality Factor (30%). 

    There are other funds with the same/less tech which did better in 2019 and have done significantly better since. 

    In relative terms it was very poor. In absolute terms, if the alternative was cash under the sofa, then yes it was very good of course! 
  • bostonerimusbostonerimus Forumite
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    I would never invest in an actively managed fund with such a small number of holdings as Lindsell Train Global Equity Fund.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
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