15 Funds That Have Destroyed the Most Wealth, M*

MikeM

Pretty interesting article. This is wealth destroyed over the past 10 years. Who knows if history repeats over the next 10 years, but it does say something about holding just the plain vanilla equity/income balanced portfolio without all the bells and whistles available.

https://www.morningstar.com/funds/15-funds-that-have-destroyed-most-wealth-over-past-decade?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_morningdigest&utm_content=51445

Conclusion
The biggest value destroyers in the fund industry illustrate that there’s no guarantee of success, even during a generally favorable market environment. Many of them also provide a valuable case study in how not to invest. (As Charlie Munger was fond of saying: “Invert, always invert.”) Investors have been far better served by the plain-vanilla fund categories that dominated the winners list, such as large-cap blend, allocation—50% to 70% equity, and foreign large blend. They’ve also generally fared well by sticking with the industry’s biggest and most established fund families. Volatile and speculative categories—as well as unproven fund shops that attract a lot of short-term hype—on the other hand, are best avoided.

Sven

Thanks for posting. ARK trust ETF ranks #1.

The category list is also enlightening.

rforno

Hassenstab's TPINX/TGBAX is on that list. My, how the mighty have fallen... glad I got out of that puppy beforehand!

hank

How did Hussman not make the list? HSGFX “boasts” a - 3.8% (negative) annual return over the past 15 years, according to M*. In fairness, at least one on the list is an inverse fund. So folks should have understood what they were doing when they bought it. No doubt some traders buy and sell inverse funds trying to time the markets rather than for long term holdings.

sma3

I didn't find this article terribly informative.

In ten years of a massive bull market with complacent investors and century low interest rates, of course, inverse funds and volatility futures are going to do badly. Most of her "stinkers" have done exactly what they are designed to do and rocketed up in the right situation. Look at TBT since 2020.

A contrarians would say now is the time to buy, as M* does itself when pointing out that "unloved" fund categories outperform the next year.

A much more useful article would have compared funds in categories and have pointed out the worst ones by catagory, and the reasons for their underperformance.

Hussman made the "family" list which is kinda odd as his other funds, I think, are nowhere near as negative as HSGFX

WABAC

Read that this morning. Wanted to look at it again, since I remembered there were some bond funds in the list, one of which was a Vanguard corporate IIRC.

The link is not working. And you won't find a link on M* Amy's page.

MikeM

Bummer. For anyone trying to access the article through my link, it's not connected anymore, at least for me.

There is a new link for the 15 most wealth creating funds I'll link below, but I suppose that one has a life too.

https://www.morningstar.com/funds/15-top-wealth-creators-fund-industry-2

Conclusion
The biggest players in the fund industry are often vilified as having too much power and failing to act in the best interests of their shareholders. But as the results above show, the largest funds and fund families have created significant value where it counts: by increasing dollar value for shareholders.

yogibearbull

Linked worked BEFORE, but doesn't now.

On a web search, it appears that M* has pulled the article. It focused on $amounts, not percentages. So, it had US Agg Bond Fund (total bond market) on the same list as the wild ARKK. M* probably received complaints.

msf

This doesn't show the tables but it preserved the M* text (and lists all 15 "wealth destroyers") as a sidebar.

https://web.archive.org/web/20240131091956/https://www.morningstar.com/funds/15-funds-that-have-destroyed-most-wealth-over-past-decade

Old_Joe

Found the list on another site, but no numbers. Uncertain of list order... maybe "least worst" to "most worst"?

Alerian MLP ETF (AMLP)
ProShares UltraPro VIX Short-Term Futures (UVXY)
ProShares UltraPro Short QQQ ETF (SQQQ)
PIMCO Commodity Real Return Strategy A (PCRAX)
ProShares UltraShort S&P500 (SDS)
iShares MSCI Brazil ETF (EWZ)
ProShares Short S&P500 (SH)
ProShares UltraPro Short S&P500 (SPXU)
KraneShares CSI China Internet ETF (KWEB)
PIMCO StocksPLUS Short Fund A (PSSAX)
VelocityShares Daily 2x VIX Short Term ETN (TVIXF)
Direxion Daily Small Cap Bear 3X ETF (TZA)
Velocity Shares 3x LongNAtural Gas ETN (UGAZF)
ProShares UltrsShort 20+ Year Treasury (TBT)
Direxion Daily S&P 500 Bear 3X ETF (SPXS)

FWIW the list includes the 15 funds that destroyed the most value for investors over the trailing 10 years through 2021


Note: I didn't "invest" in a single one of these! I'm so proud of myself.

yogibearbull

BTW, Amy Arnott's original 12/5/22 article is still on the M* website. But it had the usual culprits and didn't seem controversial.
https://www.morningstar.com/people/amy-c-arnott?page=2

But this 1/30/24 update, that was apparently withdrawn, had a rather strange mix, with several bond funds mixed with gung-ho tech & leveraged funds.

WABAC

By December 5, 2022 investors were used to getting slapped around by the usual suspects.

After the 2023 Santa rally, no one wants to be reminded that any "plain-vanilla," bond funds were staring at three losing years in a row.

Methinks the editorial side of garden-variety M* has problems similar to the IT side.

David_Snowball

For what interest it holds, the folks at Morningstar say that the "value destroyer" article was taken down "to correct some minor data errors" and should be live again by 2 February or so.

Crash

+1.
Won't change anything for me.
(Side note: I believe I shall stay away from Real Estate in the future. I can't seem to ever win that game. "Straight" stocks and bonds for me. And FUNDS, of course.)

yogibearbull

The "temporarily unpublished" article has been "reviewed internally" and sanitized (-:),
https://www.morningstar.com/funds/15-funds-that-have-destroyed-most-wealth-over-past-decade

Mark

@Crash - fwiw I don't think RE is a bad sector, but with all stocks when you buy and at what valuation makes a lot of difference, a heckuva lot. You like(ed) PSTL, just keep an eye on it. I don't expect to see the postal service's need for property going away anytime soon. I guess you could also index it using an ETF. Fair warning - I own O & NNN but have for quite some time.

Crash

Appreciate the note, @Mark. O offers monthly divvies, I am aware.