- 84% of funds rated as ‘Exceptional’ by Bestinvest have underperformed
- Less than 8% of funds in their ‘Top Rated Funds’ list are top performing
- Almost 16% of funds have less than 5 years history
84% of funds rated as ‘Exceptional’ by Bestinvest and provided with a 5 star rating in their ‘Top Rated’ funds list have performed worse than half of all funds in their sectors. As detailed in this analysis, carried out by our research team, less than 8% of all 262 funds they currently promote in their influential ‘Top Rated’ funds list have consistently maintained a top quartile ranking within their sectors over the recent 1, 3 & 5 years.
The popular Bestinvest Premier selection or Top Rated funds list has been created to cater to those seeking investment inspiration and is updated twice every year. This list showcases funds Bestinvest rate between 3 and 5 stars, and include funds they believe to be of the ‘highest quality’.
Rivalling the Hargreaves Lansdown’s Wealth 150 and Fidelity’s Select 50 recommended funds lists, the Bestinvest top rated funds list holds significant bearing among many DIY investors when it comes to making fund choices.
With a total of 262 funds (which includes both income & accumulation fund type) rated between 3 and 5 stars, their Top Rated funds list is more than double the size of their rivals.
As detailed in this report the majority of funds they favour have a history of poor performance.
Our Bestinvest Top Rated Funds Review
The attached Bestinvest premier selection fund review, analyses each of the 262 funds contained within their top rated fund lists and identifies whether they are in fact top, mediocre or poor performing funds, based on their performance and sector ranking over the recent 1, 3 & 5 years.
Each fund was also provided with a consistent performance rating based on the following criteria.
Top – Funds classified by Yodelar as top performing have consistently outperformed at least 75% of competing same sector funds over the course of the 1, 3 & 5 year periods analysed.
Mediocre – A mediocre performance rating is provided to funds that have managed to rank within the top 50% of funds in their sectors consistently over the 5 year period analysed.
Poor – A fund will be provided with a poor performance rating if at any time during the 1, 3 & 5 year periods analysed they performed worse than 50% of competing same sector funds.
How The Bestinvest 5 Star Rated or ‘Exceptional’ Funds Performed
Bestinvest claim their top rated funds list contains only the funds their research team believe to be of the highest quality, but why have a top rated funds list that includes 262 funds which are graded by 3 different rating levels?
For the first part of our Bestinvest Top Rated funds review we analysed the funds they rate as 5 star. These funds represent what they believe to be ‘Exceptional’ and ‘most likely in their sector to deliver outperformance’. In total, there are currently 34 funds they rate as 5 star and as summarised in the table below their performance has been less than exceptional.
Among the funds Bestinvest rate as ‘exceptional’ is the ‘AXA Framlington UK Select Opportunities’ fund. This fund has been a popular choice among UK investors and currently holds over £3.8 billion of client funds, yet despite its popularity it has consistently ranked within the bottom half in its sector for performance. Over the most recent year alone this fund was outperformed by 89% of of same sector funds.
The 5 star rating of the ‘Kames Strategic Bond’ and its ‘exceptional’ rating by Bestinvest is also highly questionable. This fund has a history of poor performance within its sector ranking 228th out of 280 funds for performance over the recent 5 year period.
Within Bestinvests Top Rated Funds list they also provide additional “write-ups on those funds across different sectors that we believe merit particular attention”. One of these funds selected for praise was the ‘JO Hambro UK Opportunities’ fund. Bestinvest claim this fund has a ‘high conviction strategy’ with an experienced fund manager at the helm and with their 5 star rating, it is an exceptional fund that is most likely to achieve outperformance in its sector. The fact is, this fund has regularly been among the worst performers its entire sector over the recent 5 years.
The only fund listed as 5 star by Bestinvest to have a history of top performance was the ‘Liontrust Special Situations’ fund. This fund has consistently been among the top 25% of funds in the UK All Companies sector for performance over the recent 5 years.
Less Than 2% of Funds Bestinvest Rate as ‘Very High Quality’ Have Consistently Maintained Top Performance in Their Sectors
There are 81 funds in their top rated funds list that Bestinvest rate as ‘Very High Quality’. Bestinvest state they have a strong conviction in these funds but as summarised in the table below their performance to date has lacked conviction.
Despite poor performance from a high proportion of Bestinvests 4 star rated funds there are a small selection of notable exceptions that have consistently delivered top performance to date. Included in this list is the impressive ‘JOHCM UK Dynamic Y’ fund. This fund has continually excelled and with growth of 30.1% over the recent 12 months, it outperformed 99% of funds in its sector.
However, the majority of funds that make the Bestinvest Premier Selection list have not fared so well. One of the funds rated as 4 star whose inclusion in a top funds list is questionable was the ‘Argonaut European Alpha’ fund. This fund has been among the worst in its entire sector with the R Income version consistently outperformed by at least 93% of same sector funds over the recent 5 years and over the recent 12 months its ranking was worse again, ranking 420th out of 424 same sector funds with poor growth of 6.05%.
Bestinvest 3 Star Rated Fund Performance
The 81 funds rated as 3 star or ‘High Quality’ by Bestinvest have on average performed better than their favoured 5 star and 4 star rated funds. As summarised in the table below just under 8% of their 3 star rated funds have consistently delivered top quartile sector performance over the recent 1, 3 & 5 years.
Among the top performers was the ‘Old Mutual Global Equity’ fund which over the recent 5 years achieved growth of 148.42%, which was greater than 99% of funds in its sector.
Another Old Mutual fund listed in the Bestinvest top rated funds list to impress was the ‘Old Mutual North American Equity U2’ fund. This fund has consistently outperformed in the volatile and competitive North America sector delivering 5-year growth of 157.38%, exceeding 98% of same sector funds.
Despite including a small number of top performing funds, some 55% of the 3 star rated funds in the Bestinvest top rated funds report have underperformed.
The ‘Kames Ethical Equity’ fund was one such fund. This funds performance has steadily declined over the course of the recent 5 years so much so that its recent 1-year growth of 7.63% was worse than 94% of funds in its sector and raises questions as to its inclusion in a top rated funds list.
Our analysis of the Bestinvest Top Rated Funds list identifies that the significant majority of the funds they praise to be “Exceptional”, “Very High Quality” or “High Quality” have factually ranked within the lowest 50% of funds in their sectors for growth during the recent 5 year period. With the inclusion of serial poor performing funds, investors may wish to think twice before they seek inspiration or plan to make fund choices based on the funds promoted in Bestinvests Premier Selection list.