It was refreshing to see Hendersons launch a global financials fund last month. The credit crunch that started in the summer has hit financials hard. But rather than launch a fund at a market peak, Hendersons realised the value of taking the initiative after markets have fallen.
Unfortunately, few investors are likely to buy into the concept at this stage. Instead, they will want to invest in several years’ time, when financials will probably have recovered.
As a result, they will have missed years of strong returns. Rather than benefit from equity investment, many of them will have left their money in cash. Others will have chased short-term returns elsewhere.
The same investor mentality can be seen from the recent performance of Britain’s property sector. Too much so-called hot money flooded into the sector for the wrong reason: the momentum of a rising market.
Fund groups did not seem to mind when the size of their funds was billowing. But now that returns are down and set to return to trend, that money is leaving the funds and looking for the next hot area.
According to the Investment Management Association, as UK commercial property funds are seeing redemptions it is commodity funds that are selling strongly.
This is hardly surprising, given the high price of oil, and more commodity funds will probably be launched in the coming year to cash in on the trend. It will only be possible to be certain about the attractions of such funds with the benefit of considerable hindsight.
It is such short-termism that is the problem. The fees investors incur for chopping and changing their minds make a nonsense of active fund management.
After all the fees they have paid they would be better off simply putting most of their savings in tracker funds, which statistically outperform most active funds over a longer period.
That is not to say there are not good active managers out there, but today if they underperform for a period anything over one year investors become twitchy.
As long as investors keep chasing the last market surge, groups will opportunistically launch funds to accommodate them.