<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=150680908970065&amp;ev=PageView&amp;noscript=1">
We are open, call us on 0844 798 1270
Sign In
Grade Your Portfolio

Why Investors Should Avoid Recommended Fund Lists

Topic: Investor Insights 12 April 2017


Convenience, accessibility and the low charges provided by many fund supermarkets such as Hargreaves Lansdown, Fidelity and Bestinvest has led to the continued rise of self managed or DIY investors. 

And as more move away from advice led investing their reliance on such platforms has influenced how many investors make fund selections.

Through the likes of Hargreaves Lansdowns Wealth 150+, Fidelity’s Select 50 and Bestinvests Top Rated Funds lists, investors are making fund choices based on what is presented as the best investment opportunities. But how much credence should be placed on these promoted funds? And do they represent the best opportunities for investors?

To provide clarity our research team completed an extensive independent review of the fund managers and funds contained within these lists and identified that a large proportion are in fact poor performing.


Hargreaves Lansdown Wealth 150+

Perhaps the most famous funds list of all is Hargreaves Lansdown's Wealth 150. 

Hargreaves Lansdown have over 876,000 clients with investments exceeding £70 billion. As the UK’s pre-eminent investment supermarket their Wealth 150+ list holds significant influence and has delivered a rush of investors into the funds it features.

Featuring 93 funds, the Wealth 150 list is split into the following 3 sections:

Wealth 150+

Wealth 150+ represents Hargreaves Lansdowns premier selection of funds which they believe offers "the ultimate combination of first class long-term performance potential and low management charges".

Wealth 150+ Tracker

The Wealth 150+ Tracker is a new addition to the Hargreaves Lansdown Wealth 150 and lists a selection of tracker or passive funds which represent their favourite funds that track the performance of a stock market index.

Wealth 150

The Wealth 150 includes funds that Hargreaves Lansdown believe "have excellent long term prospects, but don't have quite the same combination of 'best-in-class' performance potential and low charges as Weatlh 150+ funds".


Criticism Over Fund Selection 

Despite criticism over how they select the funds promoted on the Wealth 150 lists, Hargreaves Lansdown have insisted that ‘no one pays to get on the list’ and that all funds are selected on merit. 

To identify the quality of funds on their Wealth 150 lists our research team analysed the recent 1, 3 & 5 year performance and sector ranking of each fund. Currently, the Wealth 150+ list is made up of 44 funds, the Wealth 150 list includes 36 funds and the Wealth 150+ tracker list contains 13 funds.

Our analysis identified that less than 10% of the 93 funds promoted in the Wealth 150 lists have consistently maintained top quartile sector performance over the recent 1, 3 & 5 years, with the majority of funds underperforming. Indeed, among the funds included in their ‘favourite funds’ Wealth 150+ list was the ‘Pyrford Global Total Return’ fund, which has consistently been among the worst performers in its entire sector. This is despite Hargreaves Lansdown stating that their Wealth 150+ has “A strong track record of selecting the best funds in each sector”.


New Call-to-action


Fidelity Select 50 

In 2016 fund management giant and DIY investing platform Fidelity International launched the Select 50, which is a list of its top fund ideas. Fidelity state only the best funds make it onto the Select 50 and while they already ran a Select list available on its personal investing platform, this new list is a higher-profile, pared-down selection that pits it directly against the likes of Hargreaves Lansdown’s popular Wealth 150.

Fidelity state funds are chosen on investment merit by their nine analysts in the multi-asset Investment Solutions team. Their analysts look at various statistics such as fund performance over different time periods as well as comparative performance and consistency of ranking against peers.

With some 270,000 platform users, the Select 50 list is a popular source of guidance for many seeking out investment ideas. Similar to our review of Wealth 150, our research team also analysed all funds within the Fidelity Select 50 detailing each funds performance growth and sector ranking over the recent 1, 3 & 5 years.


Mixed Performance For Fidelity Select 50 Funds 

Fidelity have a rigorous selection process in place for their Select 50 funds list and indeed our analysis identified a number of excellent funds, but it also includes a proportion of funds that have a history of poor performance and raises questions as to their inclusion in a recommended funds list that holds significant weighting for many investors.

Among the funds included in the Select 50 is the ‘Franklin UK Smaller Companies W Acc’ fund. Over the recent 5 year period this fund has underperformed within its sector, consistently ranking in the lowest 50% for performance. The past year has seen this fund tumble further down the sector rankings and with recent 1 year growth of 9.57% it was outperformed by 91% of funds in its sector. 

The Select 50 also features a number of Fidelity’s own managed funds and includes the impressive ‘Fidelity Global Special Situations W Acc’ fund. This fund is worthy of a place on any recommended funds list and has consistently delivered outstanding performance in comparison to its peers. Over the recent 5-year period this fund has consistently outperformed 96% of funds in its sector.

Similar to the Wealth 150, Fidelity’s Select 50 includes some highly competitive fund options but with the inclusion of serial underperformers, caution is advised if selecting funds based on their inclusion in such lists.





Bestinvest Top Rated Funds List

As an online investment service that enables investors to choose and manage their own investments, Bestinvest have become one of the largest fund supermarkets in the UK. 

For DIY investors their ‘Top Rated Funds’ or ‘Premier Selection list has become a trusted source of guidance when it comes to fund selection. This list differs from both Hargreaves Lansdowns Wealth 150 and Fidelity’s Select 50 as it includes significantly more funds that have been graded from 3 to 5 stars based on how Bestinvest believe they are likely to perform.

Bestinvest Fund Rating 

5 Star Rated – Funds that are classified by Bestinvest as ‘Exceptional’ are rated as 5 star.

4 Star Rated – Funds rated as 4 star are viewed by Bestinvest as ‘Very High Quality’. 

3 Star Rated – The funds Bestinvest believe to be of ‘High Quality’ are provided with a 3 star rating.

Bestinvest feature a whopping 262 funds (which includes both income & accumulation fund type) in their Top Rated funds list, 147 of which they rate as 3 star, which raises concern as to why have a Top Funds report if the funds included are not what they believe to the best available to UK investors? Indeed, our analysis of these funds raises further questions as to the inclusion of a large proportion of funds that have proven to be among the worst in their sectors.



Poor Performing Funds included in Bestinvests Top Rated Funds List

Within Bestinvests Top Rated Funds list they 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 they believe it to be an exceptional fund that is most likely to achieve outperformance in its sector. But the fact is, this fund has regularly been among the worst performers in its entire sector over the recent 5 years.

As our report identifies, the ‘JO Hambro UK Opportunities’ fund is not the only inclusion in the Bestinvest Top Rated funds list that is questionable. In fact, 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.


Make Informed Fund Choices Based on Facts Not Opinion 

The recommended fund lists we reviewed from Hargreaves Lansdown, Fidelity and Bestinvest have been compiled based on their own selection process and while they represent different opinions there are certainly questions about the quality of the funds they each promote.

Over reliance on such recommended fund lists may in fact result in many investors to select funds that are not suitable to their investment objectives and should be viewed as opinion rather than an approved recommendation to invest, and with thousands of funds available to UK investors these compressed fund lists do not provide investors with the information they need to make informed investment choices.

As an investor, you have the choice to invest in funds that consistently deliver top performance OR funds that underperform within their given investment sector. Investors are continually informed that past performance is not an indicator of future success, but we believe that past performance is a very important metric. Past performance can identify fund manager expertise, and an ability to do better than their peers. In every industry past performance is relevant - the investment sector is no different.

No one knows what the future holds but fund managers who have consistently achieved top performance offer better potential than those who have a history of poor performance.


New Call-to-action

Join Yodelar and access all fund manager reviews. 



Back to Other Options

Thank You!

Search 100’s of fund manager reviews, articles and insights.

New call-to-action
New call-to-action

Yodelar Investment Services

With quality advice, you can Invest in funds that consistently rank in the top 25% of their sector, Discuss your needs with our expert advice team and receive a complete recommendation report.

Get started **Yodelar Investments are authorised and regulated by the Finanical Conduct Authority**
  • Receive a no-obligation investment and pension review
  • Receive a complete recommendation report
  • Receive a detailed pre and post-retirement cash flow plan