3 Underperforming Top Rated Funds

Looking for top-rated funds on the cheap? These three funds are rated Gold by Morningstar analysts but have underperformed peers in recent years. Could they be due a rally?

Emma Wall 3 February, 2017 | 10:47AM

As all investors know, past performance is no indicator of future returns. This holds true for assets which have recently rallied as much as it does for those stocks and funds which have not fared so well in the near past.

The Morningstar star-rating for funds is a purely quantitative measure, comparing funds’ performance against their category peers. As a result, this is no indicator of future returns. But the Morningstar Analyst Rating is a qualitative measure, using five pillars – process, people, price, parent and risk-adjusted performance – to determine whether a fund is likely to outperform its category peers.

The funds below are all rated Gold or Silver by Morningstar analysts, meaning that they consider them to the best in class, but they are also two- or three-star rated meaning that the units are cheaper now than in the past. It is up to you, the investor to decide whether you have conviction in these funds’ underlying exposure. But if you are bullish on corporate bonds, global equities or UK stocks these could be the funds for you.

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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.

About Author

Emma Wall  is former Senior International Editor for Morningstar

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