Isas that lost savers thousands of pounds

Investors in individual savings accounts (Isas) could be losing thousands of pounds on previously popular funds that they bought, in some cases, as long ago as 1999.

Even after the recent stock market recovery, some technology fund values are still half of what they were during the internet boom in 1999/2000.

Meanwhile, commercial property funds that were heavily marketed before the credit crisis are still showing losses of about a third.

Financial advisers said these poor returns underlined the dangers of buying into investment fashions, particularly after a period of strong performance.

Justin Modray of CandidMoney.com, the advisory website, said technology funds were a “classic fad”, that sucked investors into a bubble at what turned out to be the top of market in spring 2000. Many funds then went on to drop in value by about 80 per cent.

Property had also been seen by many as a “one-way bet” before the financial crisis, said Adrian Lowcock, senior adviser at Bestinvest.

Among these formerly “hot” Isa funds that are still showing heavy losses is Henderson Global Technology, a fund that attracted thousands of private investors in spring 2000.

Investors who have held on for the past 11 years are still down 44 per cent, according to figures from Hargreaves Lansdown, the adviser, in spite of strong growth of about 70 per cent since 2009.

Investors in other technology funds could have fared even worse: Framlington NetNet, for example, was closed after suffering losses of more than 90 per cent.

Investors in New Star Property – now Henderson UK Property – one of the most heavily-advertised commercial property funds for Isas in spring 2007, could now be sitting on losses of about 29 per cent.

New Star International Property, one of the biggest launches of 2007, barred investors from encashing holdings for a year from late 2008 as commercial property prices dropped. The fund has just been transferred to Aviva after notching up losses of about 45 per cent.

Similarly, Isa investors who bought corporate bond funds to boost their income could now be sitting on underlying capital losses, in spite of the strong overall performance of fixed interest over the decade.

Halifax Corporate Bond, probably the most popular Isa fund of spring 2003, is up 23 per cent since including net income, but the underlying capital loss is now about 13 per cent after heavy falls between 2006 and 2009, according to Bestinvest.

Its total returns have also been less than those from many cash Isas and below average for the corporate bond sector.

Advisers say that investors holding disappointing Isas should review them in the context of their overall portfolio rather than automatically selling and crystallising losses.

However, Bestinvest’s Lowcock warned that dotcom-era investors who were still in loss-making technology funds might have to wait up to another decade to recoup their money. “I’m a relative fan of tech,” he said. “But it’s probably not going to happen in a year.”

He said that investors could probably do better by switching their remaining fund value to another high-growth story, such as frontier markets.

Ben Yearsley of Hargreaves Lansdown said that investors should be contrarian and look at what others are not buying.

Rather than investing in a sector when there were lots of fund launches, he suggested looking at sectors when there were fund closures – such as Latin America some years ago – as that could be a profitable time to buy.

“Currently, lots of people are ignoring developed markets,” he pointed out.