My star manager fund is not doing well. Should I move my money?

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Q. I invested money into my son’s Isa in active funds from 2012 and then more recently during Covid. The UK fund, European special situations fund and a UK tracker did well but I invested in 2022, at the top of the market, in an active US equity (star manager) fund and it’s performance is down.
My son is now 13 and I want to invest the rest of his cash. The money would be for a house deposit, rather than university. Is there a good time to invest a lump sum into a tracker or should I just do a monthly amount into a global tracker? For the US equity fund I’m planning to just hold on to it rather than sell out.Sally, London
You are clearly giving a lot of thought to how to grow your son’s money and that’s great to hear.
Junior Isas are one of the most tax-efficient ways to invest for under-18s. They must be opened by a parent of the child, but once open anyone can pay money in, up to an annual limit of £9,000.
The contents of a Junior Isa can be invested and there will be no income tax on dividends and no capital gains tax on profits. When the child turns 18 it will convert to a normal Isa, and the portfolio will remain tax-free. It is not possible to withdraw from a Junior Isa until the child turns 18.
As with any investment portfolio, the right level of risk will depend on your timescale. A Junior Isa for a newborn baby could be invested in relatively risky assets because it will not be possible to touch the funds for 18 years. Conversely investments should not be high-risk for a 17-year-old who intends to withdraw the full amount to cover university fees within the next 12 months.
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It sounds as though your son intends to go to university and then buy a property afterwards, in which case he will probably not be drawing on the portfolio for at least eight years. So it makes sense to invest the rest of the cash into a portfolio focusing on shares, rather than lower-risk investments such as bonds.
US equities are at a record high. This applies to large companies, measured by the S&P 500 index, and smaller companies, measured by the Russell 2000 index — it’s a shame, then, that your US fund is significantly down.
Have a look at the latest commentary for the fund to find out the reasons for its underperformance and what the managers are doing to rectify this. I would also look at the reviews of the fund on analysis sites such as Trustnet and Morningstar.
Investing in a global tracker fund is a good idea. I would recommend one tracking the MSCI World index, which contains more than 1,400 constituents from a range of developed economies. Given that the index has had a strong run, I would take a phased approach to investing the cash. You could invest a series of smaller lump sums, or alternatively you could set up a monthly investment as you suggested.
A robo-investing app such as Silo or Nutmeg could be a good option. You complete a questionnaire about your risk level and the app automatically manages the investments for you, lowering the risk level of the portfolio as your investment deadline approaches.
Rachel Winter is a chartered wealth manager and partner in the investment management team at Killik & Co