Investors have been warned against chasing annual best performing fund lists after new data analysis has found the leaders rarely replicate performance.
A new study from Oxford Risk found that half of 2021's top ten list lost money last year, meaning none of the portfolios made the same ranking in 2022, Investment Week has learned.
The research also showed that all of 2020's top performing funds lost money last year, while four have lost money over three years.
Overall, the best funds of 2022 were dominated by energy funds, with the only non-energy portfolios on the list being iShares MSCI Turkey and HSBC MSCI Turkey, returning 99.5% and 98.8%, respectively.
In contrast, 2021 saw five energy-related funds, two Indian funds, one focused on global asset managers and two frontier market funds.
In 2020, the top ten was composed of five US-focused funds, one tech fund, and three aimed at outperforming indices plus a gold fund.
Five of the top ten came from Baillie Gifford.
Greg Davies, head of behavioural finance at Oxford Risk, said: "Top ten lists are tempting but as the warning goes, past performance is no guarantee of future performance and our analysis bears that out."
He said funds which perform strongly in one year "are not guaranteed to deliver outstanding returns" for the long-term, and said advisers should "solutions that are right for individual clients' circumstances and preferences. That should not mean switching to chase top ten lists, nor should it mean necessarily dropping funds which have had poor years."
Davies added: "Investors too often focus too much on the present and on the detail, and despite their better judgement many feel compelled to do something when in many cases they should not."
Link: https://www.investmentweek.co.uk/news/4062995/performing-funds-fail-repeat-success