Perpetual problems beset a big player

By DAILY MAIL REPORTER
Updated:

 

Investors in Perpetual UK Growth fund have been having a hard time of it lately. The fund, which looks after more than £1 billion of savers' money, isn't living up to its name: indeed, growth seems to have been strangely elusive.

Statisticians Standard & Poor's Micropal says £1,000 invested in Perpetual UK Growth six months ago would now be worth £806.41 after charges, ranking it 273 out of 274 in the sector.

And the picture's no better over the longer term. A sum of £1,000 invested three years ago would now be worth £1,090.88, ranking it 223 out of 224. The average UK growth fund over the same period would have turned £1,000 into £1,443.94.

The fund's mission statement is to 'achieve capital growth in the UK'. Late last year, it was downgraded by ratings agency Standard & Poor from a triple A to a single A rating. So what's gone wrong?

Kean Seager, of adviser Whitechurch, says: 'Despite its name, Perpetual UK Growth is a value-based fund rather than one that seeks out fast-growing companies.'

Value investors look for companies that seem cheap in relation to others rather than rushing into companies that offer fast growth opportunities.

But the companies that have performed well in recent months have not been the ones value investors have looked at: they've been technology and telecom companies.

Mr Seager says: 'Perpetual has stuck to value investing and that has proved to be wrong. They've been particularly wrong over the past few months because they've decided to turn against tech.'

However, he says anyone in Perpetual UK Growth should stay put. 'I genuinely think things are about to turn about. Over the next five years or so, value investors could be proved right.'

Justin Modray, of Chase de Vere, agrees. 'We're sticking with it at the moment. But keep a close eye on it: you might want to change your mind in a couple of months and jump ship.'

But Don Clark, of Torquil Clark, points out that the fund's also short of telecom and pharmaceutical stocks. 'It's not just dot.com companies it's missed out on. I think I'd probably move if I was in this fund because these days, you have to be in technology.'

He says investors should think about moving into Newton Income or Save & Prosper Premier Equity Growth.

Bob Yerbury, Perpetual's chief investment officer, says: 'Last year was a disaster for this fund. There have been two hard periods: one in 1998 and the other in the fourth quarter of last year.'

He says the problem was the fund had no telecom stocks, such as Vodafone Airtouch, but was more into breweries and hotels such as Bass.

Mr Yerbury said that fund manager Stephen Whittaker 'hasn't got anything against technology. But if he can't find attractive ones in the British market then he won't buy them'.

The problem is, says Mr Yerbury, that British technology and telecom stocks are just over-priced.

He adds: 'I would say to investors in this fund: 'Stay put. Did Stephen have a good year last year? No. But investors should see he's been running this fund a long time and has done well. We will stick with him.'

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