Wealth adviser Bestinvest has included AXA Framlington Monthly Income (GB0003500286) in its Spot The Dog list of underperforming funds. This is a list of UK domiciled unit trusts and open-ended investment companies that have failed to beat their benchmark over three consecutive 12-month periods, and have also underperformed their benchmark by 10 per cent or more over the three years to 30 June 2013.
Over three years, according to Bestinvest, this fund made a return on £100 of £130 as opposed to 143.52 per cent for the FTSE All-Share, a three-year relative return of -10 per cent.
"The form of one time star manager George Luckcraft's AXA Framlington Monthly Income Fund may require more than a visit to the vet to get it back on track," says Bestinvest. "The run of poor relative performance has occurred in spite of the fund's significant bias to small- and mid-sized companies. Small- and mid-cap companies significantly outperformed the broader FTSE All-Share Index over the last three years, suggesting poor stock selection has been the culprit."
The fund has more than 30 per cent of its assets in FTSE 250, FTSE Small-cap and FTSE Fledgling shares.
The fund has also performed poorly against its sector, Investment Management Association (IMA) UK Equity Income. It is the poorest performing fund in its sector over five years out of 73, and is among the bottom 25 per cent in terms of performance over one and three years.
However, the fund does offer an attractive yield of 5.15 per cent with a standard total expense ratio of 1.64 per cent. Bestinvest stresses that inclusion in the list does not mean a fund should be automatically sold as, for example, certain investment approaches work better in certain market conditions.
"But unless there are good reasons to believe performance will turn around it may make sense to switch to a best-of-breed fund," concludes Bestinvest.
Bestinvest's Best of Breed UK Equity Income funds comprises: Threadneedle UK Equity Income (GB0001448900) (read our tip), Invesco Perpetual High Income (GB0033054015), Fidelity MoneyBuilder Dividend (GB0003860904) (read our tip), Invesco Perpetual Income (GB0033053827) and Artemis Income (GB0006572464).
