FUND FOCUS: Best ideas are not too bright

By RICHARD DYSON, MAIL ON SUNDAY DEPUTY PERSONAL FINANCE EDITOR
Updated:

Launched with great fanfare in June 2006, Skandia's Global Best Ideas investment fund has disappointed. It delivered unremarkable returns in its first 18 months while the stock market rose and then plunged during last year's turmoil.

The fund's portfolio comprises the ten 'best idea' shares of each of ten 'world-class' fund managers. Half of the £248 million portfolio is invested by five managers among UK stocks.

Five other managers invest the rest on world markets in proportion to different economies' sizes. For example, the US gets 16 per cent of the fund's assets and the Continent 14 per cent.

Skandia Global's stock market price over the past two years

Skandia Global's stock market price over the past two years

Managers are given free rein to back their ideas, which means some industries and companies are duplicated.

Four of the UK managers hold arms firm BAE Systems and, until recently, oil companies accounted for three of the fund's five biggest holdings. This doubling-up of shares adds risk.

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Portfolio co-manager Ryan Hughes says: 'The past year has been very challenging, but the concept behind the fund is strong and working.'

Financial advisers initially warmed to the fund, but with a record of underperforming more in the downturn than outperforming in the preceding rise, Hughes will have to work hard to retain investors' confidence.

The fund is costly, with expenses gobbling up more than 2.3 per cent of assets each year.

So far investors have overpaid for poor returns.

Questions also emerge over Skandia's selection of managers.

They are apparently monitored and replaced when they fail to perform, but as Skandia refuses to publish individual performance records, there is no evidence on how rigorous this process is.

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