In a year in which many investors have benefited from artificial intelligence hype and interest rate cuts, there has been plenty to celebrate. But some funds have been unluckier with their returns than others.
After looking at the 10 funds that are currently outperforming their categories, we move on to the underperformers. These funds are lagging their peers so far in 2024.
The funds in the below list all have a Morningstar Medalist Rating of Bronze or higher, and have a fund size of £50 million or above. We have selected the 10 with the lowest return from the categories used by Morningstar analysts to organize and assess performance. These strategies represent categories across equity, equity income, allocation and bonds.
Funds underperforming against their category so far this year include:
• iShares Over 15 Years Gilts Index Fund (UK)
• Liontrust UK Smaller Companies Fund
• First Sentier Investors - Stewart Investors Global Emerging Markets Leaders Fund
• WS Lindsell Train UK Equity Fund
• Climate Assets Balanced Fund
• IFSL Evenlode Investment Funds ICVC - IFSL Evenlode Income
• Vanguard UK Lg Dur Gilt Idx £ Acc
• Jupiter European L Inc
• BIBF Over 10 Year Corporate Bd B GBP Inc
• Virgin Money Bond Fund
iShares Over 15 Years Gilts Index Fund (UK)
• Morningstar Medalist Rating for iShares Over 15 Yrs Gilts Idx (UK) X Acc: Gold
• Morningstar Category: GBP Government Bond
The £2.1 billion iShares Over 15 Years Gilts Index Fund (UK) has had a fall from grace in 2024. It has fallen 3.84% year to date, while the average fund in its category fell 0.21%. Over a 12-month period, however, a 11.24% gain on the passively managed fund beat the 8.4% gain on the average fund in the GBP government bond category, achieving a top 10 percentile for performance. But, the fund lagged its benchmark, the FTSE Act UK Conventional Gilts Over 15 Yearr Index, by 1.86 percentage points. The BlackRock fund has dropped 14.92% over the past three years and lost 9.62% over the past five years. The oldest share class, which we looked at here, has a Bronze Morningstar Medalist Rating, but its two X share classes are both awarded Gold.
Liontrust UK Smaller Companies Fund
• Morningstar Medalist Rating for Liontrust UK Smaller Companies R Inc: Bronze
• Morningstar Category: UK Small-Cap Equity
In the year to date, Liontrust UK Smaller Companies fell 1.06%, leaving it in the 100th percentile, while the average fund in the UK small-cap equity category rose 8.03%. The £918 million fund, which launched in August 1995, has lagged its category these past years, dropping 8.80% over the past three years on an annualized basis. However, the category is also down over the same period, with an average return of 6.39%. The longer-term returns have, however, been stronger than its category, and the fund is in the 8th percentile over 10 and 15 years annualized. All share classes are Bronze-rated by Morningstar.
Stewart Investors Global Emerging Markets Leaders Fund
• Morningstar Medalist Rating for First Sentier StewartInvGlblEmLdrBGBPAcc: Silver
• Morningstar Category: Global Emerging Markets Equity
Stewart Investors Global Emerging Markets Leaders Fund has gained 0.07% in the year to date, underperforming the average fund in its category, which rose 10.45%. The fund placed in the 100th percentile for performance. The £441 million fund, which launched in December 2003, has climbed 1.74% over the past three years and gained 2.28% over the past five years on an annualized basis. The average global emerging markets equity fund, meanwhile, was down 2.29% over three years and up 4.06% over five years on average. The highest rated share classes have a Morningstar Medalist Rating of Silver.
WS Lindsell Train UK Equity Fund
• Morningstar Medalist Rating for WS Lindsell Train UK Equity Acc: Bronze
• Morningstar Category: UK Large-Cap Equity
Lindsell Train UK Equity is the second-largest fund in the list. The £3 billion strategy has gained 2.09% in the year to date, while the average fund in its UK large-cap equity category is up 20.56%. The Lindsell Train fund, which launched in July 2006, has seen years of underperformance, sitting in the bottom decile over five years, where it has gained 2.81% on average each year. Over longer periods, however, the fund has outperformed. Over 10 years, the fund has an average return of 8.51%-in the 6th percentile-and 11.07% over 15 years-the second percentile. All of the fund’s share classes are Bronze-rated.
Climate Assets Balanced Fund
• Morningstar Medalist Rating for Climate Assets Bal C GBP Acc: Bronze
• Morningstar Category: GBP Allocation 60-80% Equity
The £402 million Climate Assets Balanced fund, which falls into the GBP allocation 60-80% equity category, has climbed 3.57% in the year to date, while the average fund in its category is up 8.94%. The Thesis fund, which launched in February 2010, climbed 14.1% over 12 months, just below the category average of 15.30%. It is up 1.25% over the past three years and gained 4.82% over the past five years on average. All share classes have Bronze ratings.
IFSL Evenlode Income
• Morningstar Medalist Rating for IFSL Evenlode Income B Acc: Gold
• Morningstar Category: UK Equity Income
The largest fund in this list, Evenlode Income, is another fund that has outperformed over 10 years, where an annualized return of 9.30% has earned it a spot in the top 2%. But in 2024 so far, £3.2 billion fund has only gained 5.48% while the average fund in the UK equity income category is up 10.93%.
Morningstar initiated coverage of the fund last month, awarding all share classes a Gold Medalist Rating. Manager research analyst Daniel Haydon says: “We like the investment philosophy, which focuses on quality, dividend growth, and self-investment. The bespoke cash flow framework embeds discipline, and the resulting valuation-driven rebalancing has been additive over time.”
The Evenlode fund has climbed 6.43% over the past three years and gained 5.32% over the past five years on average.
Vanguard U.K. Long Duration Gilt Index Fund
• Morningstar Medalist Rating for Vanguard UK Lg Dur Gilt Idx £ Acc: Gold
• Morningstar Category: GBP Government Bond
In the year to date, the £940 million Vanguard U.K. Long Duration Gilt Index fell 3.70%, while the average fund in its category fell 0.21%. This left the fund in the 98th percentile. The fund, which launched in February 2011, has dropped 15.01% over the past three years and lost 9.62% over the past five years on an annualized basis. All share classes are Gold rated.
Jupiter European Fund
• Morningstar Medalist Rating for Jupiter European L Inc: Bronze
• Morningstar Category: Europe ex-UK Equity
The £2.7 billion Jupiter European Fund fell 2.16%, while the average fund in its Europe ex-UK Equity category rose 5.05%. The actively managed fund is however up 10.54% over 12 months, but has still underperformed the category, which rose 15.42%, and lagged its benchmark (FTSE World Eur Ex UK Index) by 6.49 percentage points. The fund, which launched in July 1987, has dropped 0.47% over the past three years and increased 5.28% over the past five years on an annualized basis. The Z share classes have Morningstar Medalist Ratings of Silver.
BlackRock Institutional Bond Funds - Over 10 Year Corporate Bonds
• Morningstar Medalist Rating for BIBF Over 10 Year Corporate Bd B GBP Inc: Bronze
• Morningstar Category: GBP Corporate Bond
The BlackRock Institutional Bond Funds - Over 10 Year Corporate Bonds has climbed 0.05% in the year to date, while the average fund in its GBP corporate bond category is up 3.31% The £480 million BlackRock fund, which launched in January 2006, has dropped 7.33% over the past three years and lost 3.21% over the past five years on average. Its best share class rating is Bronze.
Virgin Money Bond Fund
• Morningstar Medalist Rating for Virgin Money Bond: Bronze
• Morningstar Category: GBP Diversified Bond
In the year to date, Virgin Money Bond is in the 98th percentile after underperforming the average GBP diversified bond fund, returning 0.12% against the category’s 2.86%. The £172 million fund has returned below the category average across all time periods looked at in this article – from 2024 so far, to 15 years annualized (2.15%). The fund launched in October 1995 and has dropped 3.88% over the past three years and lost 2.51% over the past five years on an annualized basis. However, the category average for both periods are both negative, too.
