Is there really that much difference in performance between investment funds or are they all much of a muchness as I have some investments and pensions and I have no way of knowing whether or not I am getting the best performance for my money or not.

That’s an interesting one. Let me give you a really quick example by using the 'cautious' sector, why everyone should immediately look at who their money is invested with and look for independent investment advice.

Let's take an investor who has decided to invest into a cautious managed fund in pursuit of protection of their assets. The investor's general expectation would be that the returns would be broadly similar across most funds. Unfortunately not. Over the last year you would have had some very interesting results.

For example Marlborough fund managers have a fund that is down -12.4% over the last year with its MFM Tait Walker cautious fund.(1) That may not seem to be much of an issue but when you see the average for the sector is +16.8% and that only two other funds have lost money over that year out of 168, you may think it peculiar. The best two funds returned 43% and 31% respectively. And so an investor in the best fund would be 85% better off than the worst fund for that one year!

Such disparities should not occur in a sector that is supposed to be cautious, yet they exist.

Similarly on a study of risk, the difference is immense. The riskiest fund, as measured by Standard deviation over five years, carries 221% more risk than the most cautious fund.(2) If you look over five years the numbers are even more interesting. Top of the 'I didn’t do a thing with your money' list is AXA defensive distribution with a shocking -3.3% return over the period when the sector average was 18.8%.(3) Consider the poor folk who have over £132m invested here have the joy of an annual total expense ratio of 1.64% for the joy of losing that much money.(4) A really useful measure of a fund is something called Sharpe ratio. In simple terms, Sharpe ratio measures how well the return of an asset compensates the investor for the risk taken. And so it’s a measure I rely on when ascertaining which funds to purchase or not to purchase for investors.

So consider what happens when I ascertain the worst Sharpe ratios over the five year period i.e. those funds who add least value for the risk taken. Ranking very highly in the 'we really haven’t done very well top 20' are some high profile names. Joining AXA are: three funds from Santander (was Abbey), two funds from a Barclays legal and general fund, one from Norwich union (Aviva), one from Lloyds (Scottish widows) and HSBC.(5) As if banks haven’t had a bad enough time overcharging and making inappropriate decisions, here they are providing the worst value for the risk they are taking with investments.

And the charges are not too favourable: For example the Scottish widows balanced fund has a total expense ratio (basically the total charge) of 2%.(6) The Legal and General (Barclays) balanced portfolio trust has an even worse total expense ratio of 2.05% per year.(7) Investors are also being subjected to an age old tradition of up front charges that they don’t need to endure. For example HSBC income fund of funds has an up front fee of 4%, and that is one of the cheaper options.(8) Three years ago we moved most of our customers to a system that enabled them to buy all their investments at cost (c0.3%), yet customers within these banks' funds are still being subjected to brutal costs and investment capability.

Seeing as the decade I have dubbed as the naughty noughties are out of the way, perhaps in the 'ones' investors will put oneself first.

If you have a query regarding a fund that you would like to ask Peter about call 0845 230 9876, e-mail info@wwfp.net Source: (1) Trustnet (2) Lipper (3) Trustnet (4) AXA (5) Lipper (6) Scottish widows (7) Barclays Legal and general (8) Digital look