Wealth adviser Bestinvest's latest Spot the Dog report of underperforming funds found that the sector with the most underperformers was North America, and the fund with the poorest performance was Investec American (GB0032033341). This fund has failed to beat its benchmark over three consecutive 12-month periods and underperformed its benchmark by 10 per cent or more over three years to the end of 2012. It is also the poorest-performing fund in the North America sector over three years, and also among the 25 per cent of poorest-performing funds over one and five years.
However, Investec has set in place some significant changes to turn around performance. Between its launch in 2002 and August last year, the fund's management was outsourced to US-based Thornburg Investment Management, which up until 2002 was successful with its value investment approach. But following a bad run for Investec American since around 2008, last year Investec decided to bring management back in-house, assigning the fund to its contrarian investment team, headed by Alastair Mundy.
Mr Mundy has had great success with his UK Special Situations (GB0031075665) and Cautious Managed (GB0031074817) funds, and Temple Bar Investment Trust (TMPL). The contrarian team takes what Investec describes as "a natural value approach", so they feel it suits the investment style of the American fund, and the team of 11 includes US analysts.
Read our latest interview with Alastair Mundy
The fund holds only two of the 45 shares it held before August 2012. Shares added to the fund are higher quality in terms of their debt-to-leverage and debt-to-equity levels, and the valuations are much more attractive.
Investec initially wants to bring the fund's performance in line with the S&P 500, as it has underperformed this over the past few years, and it then hopes to see a turnaround in performance in the next two years.
