Should You Own More than One of the Same Fund?

How many UK equity income funds do you have? What about global growth? Owning multiple funds is not always a good way to diversify your portfolio

Emma Wall 31 October, 2017 | 8:54AM

Investors who own more than one fund are more diversified than those who own just one – right? Wrong. At least, not if those funds actually hold the same stocks. Research by Morningstar published last week revealed that there was significant overlap between UK Equity Income funds. Three companies are owned by eight of the 10 biggest funds in the sector by assets under management, many more stocks feature in multiple portfolios, including those run by Neil Woodford, Schroder’s Kevin Murphy, Threadneedle’s Richard Colwell and Clive Beagles at JOHCM.

Similarly, top-rated UK smaller company funds show some overlap – with SLI UK Smaller Companies, Artemis UK Smaller Companies and Old Mutual UK Smaller Companies all holding the following stocks; Sanne Group, Dechra Pharmaceuticals, FDM Group and XP Power.

The dangers of doubling up on holdings becomes apparent when a stock falters – take AstraZeneca (AZN) earlier this year for example. The pharmaceutical firm saw its share price dip 16% after a disappointing drug trial, and many UK equity income funds fell with it. When BP (BP.) suffered its oil spill, the share price dropped 30% and global equity, UK equity and even ethical funds dropped in value too.

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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.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Artemis Global Income I Acc1.17 GBP-0.74
Artemis UK Smaller Companies I Acc1,430.78 GBP0.08
AstraZeneca PLC8,580.00 GBP0.00
BP PLC305.75 GBP0.00
Fundsmith Equity I Acc5.02 GBP0.05
LF Blue Whale Growth I Sterling Acc160.33 GBP0.77
Lindsell Train Global Equity D GBP Inc2.65 GBP-0.37
Merian UK Smaller Companies R GBP Acc2.59 GBP-0.99
SLI UK Smaller Companies Inst S Acc106.70 GBP0.00

About Author

Emma Wall  is former Senior International Editor for Morningstar

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