Check out your bank investment funds!

04/06/2008

While it is common knowledge that the fortunes of the big banks have suffered badly in the credit crunch, many thousands of investors with household name lenders will be severely out of pocket – and older investors pinning their hopes on income funds to support their retirement are particularly badly hit, says the fund analyst.
 
NatWest, Royal Bank of Scotland, Halifax, HSBC and the Lloyds/TSB run Scottish Widows’ corporate bond and income funds have all experienced severe under-performance in the past 12 months.
 
Corporate bond funds - which account for around £10 billion of all ISA, PEP and Non ISA investment according to the industry organisation the Investment Management Association (IMA) – all have the lowest E rating under the Moneyspider.com system, which ranks funds from A (best performer) to E (worst).
 
How the banks are failing their income seeking investors

 

Bond funds are particularly popular with older investors hurt by historically low base rates and desperate for additional income to boost pensions. One of the UK’s biggest corporate bond funds, run by banking giant HSBC – with around £550 million under management – is down by 4.7 % in the year to March 2008, despite soaring stock market growth in the first, second and third quarters of 2007. And that’s before allowing for inflation.
 
Halifax’s corporate bond fund is down 6.7 % year on year, while banking giant NatWest’s bond fund has fallen 6.4% to go with its E rating. (Source: Financial Express March 2008)
 
Most of the high street bank corporate bond funds are disappointing their investors, the majority of whom are risk adverse, having traditionally stayed away from the equity market in favour of supposedly low risk bond funds.
 
“Invariably, investors are seduced into going to the banks because they think the name is trustworthy and they want to go into the branch and talk to someone about investing – and the fact that the base rate has been so historically low over the past five or so years has given bank sales teams the opportunity to push corporate bonds as providing an opportunity to maximise income,” points out Moneyspider director Tony Ahearne.
 
“Corporate Bonds are often sold to low-risk investors, who are invariably under the impression that they can enjoy higher income than they could get in a standard savings account, plus some capital growth.
 
“Corporate bonds are the second biggest ISA sector, boasting hundreds of thousands of investors, and there is likely to be a great deal more loss to come,” he predicts.
 
“Our research will shock thousands of older investors hoping for income from their corporate bond funds - and it highlights the dangers of simply relying on a well known name to deliver good returns.”
 
And if you’re not invested in a Corporate Bond Fund it’s still crucial to pick the right funds from the best performing Managers. If you had invested £5,000 in the best performer fund over the last three years it would now be worth £18,523. But if you’d picked the worst your £5000 would now be worth just £2106. A difference of a staggering £16,417! (Source: Moneyspider.com / Financial Express, May 2008).
 
Check out your investments

If you have investments and want to find out how well or or badly they are performing, you can do this very simply by registering your funds with Moneyspider.com/MT.
 
Moneyspider lets you see at a glance how your ISAs, PEPs and Unit Trusts are performing; what they’re worth; how they’re rated; and - crucially - how they compare with other funds.
 
Registration is free and quick, you will never be asked for any money and you won’t have your investments moved or changed: they’ll stay in the same funds and with the same fund managers. If you do decide to move your funds at a future date, Moneyspider is authorised to do that for you. What’s more Mature Times has negotiated for you to receive a cheque for £20 once your funds are registered.   For full details, simply log on to the website linked below.
 
To receive your £20 cheque, insert the promotional code MT24 when prompted at the registration stage and return the voucher on this page with the paperwork sent to you.
 
Moneyspider Limited is an appointed representative of Anthony, Bryant and Company (Investment Consultants) Limited, which is authorised and regulated by the FSA.