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10 Worst-Performing Funds of 2017

The list of 10 worst-performing funds in 2017 to date is dominated by energy funds and includes a Morningstar Silver rated offering. Can they bounce back?

David Brenchley 27 November, 2017 | 2:52PM

Energy-related offerings dominate the list of worst-performing funds so far in 2017.

It’s been a good year for stock investors, with equity markets around the globe supported by global economic strength.

It’s no surprise to see some of the top-performing funds in 2017 so far have been focused on three areas, according to data from Morningstar Direct. Those areas are Asia, technology and emerging markets more generally.

However, it’s also no surprise to see one area in particular hogging the bottom of the table: energy. Stripping out hedge funds like Odey Odyssey and Odey Swan, which have lost sizeable amounts year-to-date, the seven worst performers are all commodity-related.

They include the Morningstar Silver Rated Guinness Global Energy fund, which has lost 13.41% so far this year.

The fund gives investors pure exposure to global energy markets through investing in companies in the oil, natural gas coal, alternative energy, nuclear and utilities sectors. As a result, its performance will fluctuate alongside commodities prices and demand.

That’s shown in its chequered performance history and is why we see it as a niche player and a small position in a portfolio. It went through a tough time in 2014 and 2015 as they price of oil tanked, before bouncing right back to form last year, returning 52%. While performance has turned down once again this year, it’s still just in positive territory over five years up 1.3%.

Morningstar analyst Fatima Khizou points to manager Tim Guinness’s “impressive 10-year track record” while running the Investec GSF Global Energy fund.

Writing in March, Khizou said the fund had been hurt by its exposure to exploration and production and emerging markets integrated stocks. It runs a concentrated portfolio of 39 stocks. The fund's largest holdings are North America listed, led by Devon Energy (DVN) and Hess Corp (HES), with BP (BP.) and Royal Dutch Shell (RDSB) both in the top 10.

“Investors should be aware that the team’s approach has led to above-average volatility compared with its Morningstar category and benchmark index,” says Khizou. “We continue to believe that this is one of the best propositions within the energy space.”

There are worse performers in the year-to-date, with Schroder ISF Global Energy, down 24.72%, LO Funds Global Energy losing 16.18%, Investec Global Energy down 15.91% and Smith & Williamson Global Gold & Resources down 14.41%, all lagging the Guinness fund. The latter has a four-star performance rating, having almost doubled in value last year.

Away from the Investment Association’s Specialist sector, BlackRock Emerging Markets Absolute Alpha also fares poorly, down 8.93%. Hermes Multi Strategy Credit, a five-star performance rated fund reflecting a better long-term track record, has lost 6.43%.

The top 10 is rounded off by CF Canlife Global Resource down 12.3%, Junior Gold down 11.42%, and Artemis Global Energy which has lost 8.9%.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author David Brenchley

David Brenchley  is a Reporter for Morningstar.co.uk