Future performance of new funds 'set in first six months'

Investors should wait six months before buying a newly-launched fund, and then only if it has already posted strong performance, according to analysis carried out by Dennehy Weller & Co.

The research revealed a fund which performs well through the first six months if its lifetime has an 84% chance of still doing so three years down the line. Also, fledgling funds which have not performed well in their first half-year have a tendency to continue to underperform, the report said. About £20bn is invested in underperforming funds and 35% of these are new launches, the analysis also found. More specifically, four out of the five US equity funds launched in the three years to 31 March 2011 have underperformed the sector, and the only fund which beat the sector average wa...