How UK Investors Choose A New Fund

Past financial performance is still a vital factor for investors when choosing a new investment

Past financial performance is one of the most important factors (86%) that investors take into consideration when buying a new equity based investment according to research by MORI on behalf of Framlington Investment Management. In fact only 10% of investors said the past performance wasn't at all important when deciding which fund to choose.

These findings may come as a surprise to the Financial Services Authority who have been campaigning over several months to persuade investors to not place too high an importance on past performance.

Craig Walton, director at Framlington said: "Although the statisticians and academics have been trying to persuade investors against using past performance as an important criteria, the research shows that investors are still voting with their feet and opting for the funds that are making headline figures."

The reputation of the fund management company was found to be the most important factor for UK investors when considering taking out a new equity based investment, with 89% selecting this as a critical or important criteria in their decision-making process. Past performance came in at 86%.

The reputation of the individual person or people managing the fund (84%) was the third most important factor followed by the need for low charges (81%).

The research was also found that newspapers and magazine were the most popular source of information for investors when they built up their existing portfolios (see table below). This is with the exception of Investment Trust holders, who tended to go to an Independent Financial Adviser. Investors who hold stocks and shares predominantly use newspapers for information, however, their second port of call is family and friends.

Investors were also split over the use of the internet as a source of information: stocks and shares investors tended to make the most use of the internet, closely followed by ISA and Unit Trust investors whereas, Investment Trust and PEP holders were less likely to use this channel.

The table below illustrates where holders of different types of investments went for advice and information:

Technical details

The research project was carried out by MORI Financial Services, amongst 500 investors, aged 18 and above, from 13 to 24 November 2000 in order to monitor trends amongst investors about asset allocation and portfolio planning.

To obtain further information on any of the Framlington funds, investors should visit www.framlington.co.uk or call Customer Services on 0845-777 5511. For an ISA investment pack investors should call the 24hr ISA literature line on 0845-702 3138.