In such unforgiving times, finding a fund that regularly beats the stock markets is difficult — but not impossible.
According to Bestinvest, Artemis Income takes first prize among British funds for managing to consistently outperform its benchmark in each of the past three years, rising by a total of 24%. If you had invested £1,000 in the fund three years ago it would now be worth £1,240. If you had put the same amount in the average British scheme it would have shrunk to £710 — £530 less.
Liontrust First Income, with a rise of 21%, and Artemis UK Special Situations and Fidelity UK Special Situations, both up 18%, also make the grade.
All of these funds adopt a value approach to seek out shares that look cheap compared with their peers. These stocks tend to do better in poor market conditions — so value-fund managers might find it harder to outperform their rivals if equities pick up. But Justin Modray of Bestinvest thinks they are still good funds to hold in a portfolio.
He said: “In rising markets, value funds often underperform growth funds, but it is not black and white. Value managers can use their stockpicking abilities and continue to perform well should markets recover.”
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European stock markets have been more risky for investors over the past three years — the FTSE World Europe ex-UK index has fallen 38%. But some funds have bucked the trend.
Odey Continental European, for example, has gone up 11% over the past 36 months, while Fidelity European has fallen just 2%. There was a change of manager this year but the fund has continued to do well.
Modray said: “Anthony Bolton managed the fund until January, when Tim McCarron took over. He seems to be continuing Bolton’s good work.”
International funds that invest globally have had an even tougher time. Alliance Trust, a global investment trust that is 50% invested in Britain, is down 13% over three years, compared with a fall in the MSCI World Index of 39%.
However, you should never invest in a fund purely on the basis of past performance.