INVESTORS have pulled millions out of Britain’s biggest funds over the past six months as they have run scared of the credit crunch.

The biggest loser, according to fund research firm Lipper, has been Norwich Property, whose value has plunged by a third from £4.2 billion to £2.8 billion since June, both because the value of commercial property has slumped and savers have scrambled for the exit.

However, equity funds have not been immune from the sell-off. Fidelity Special Situations, now run by Sanjeev Shah following Anthony Bolton’s departure at the start of the year, has shrunk by nearly 10% to £2.9 billion over six months. The value of its underlying assets is down 4% over the same period.

Next week the investment industry body is expected to say that sales were weak in December, after November was its worst month since records began. Investors pulled £333m more out of unit trusts than they put in - the first time net sales had been negative since July 1992.

Peter Hicks of Fidelity said: “Money dried up when the Northern Rock crisis broke – almost to the day. I expect sales in December will be as bad as in November. These are unprecedented times.”

While advisers caution against making knee-jerk decisions, this is nevertheless the perfect time to conduct an audit of your portfolio.

We have looked at how the 10 most popular funds are faring in the credit crunch and whether advisers would rate them a buy, sell or a hold.

Invesco Perpetual High Income and Income

Since the giant Fidelity Special Situations fund was split in two in 2006 to prepare for Bolton’s departure, these two funds run by Neil Woodford have been the biggest in Britain at £9.5 billion and £6.7 billion respectively.

They have increased in size over six months, even though performance has been flat, as investors sought a safe haven. Equity income funds traditionally focus on high-quality stocks with lots of cash.

That is not to say equity income funds don’t lose money. Since the start of the credit crunch, the average fund in the sector is down 13%, although Woodford has steered clear of troubled banks and is down only 6%.

Verdict: Hold if you’re an existing investor and buy if you’re looking for somewhere relatively safe for your cash. Darius McDermott of Chelsea Financial Services said: “Woodford was famously negative on banks when the sub-prime crisis began. He is a solid manager who should weather the storm in these unsettled times.”

Fidelity European

The £4.8 billion fund lagged behind the market last year because of its big holdings in European banks - nearly 40% of the fund is in the financial sector. However, it has managed to arrest its underperformance and is up 1.4% so far this year compared with an average fall of 8% for its sector.

Verdict: If you’re an existing investor, make sure you are comfortable with the high exposure to the banks, but if you’re in for the long term, stick with it.

M&G Global Basics

This fund, which invests primarily in oil and mining firms, has been a poor performer as industrial metal prices have tumbled by nearly 20% this year.

Commodities were one of the best bets during the bull market as voracious growth in China and India fuelled demand, but they have fallen rapidly out of favour as fears of a global recession have taken hold.

Verdict: Most analysts agree now is not the time to be investing in commodities. If you are already in, check you are not overexposed – most advisers recommend you have no more than 10%. If you have more, it may be worth banking the stellar profits you have undoubtedly made and putting the money in a more defensive sector.

Jupiter Income

Like most income managers, Jupiter’s Anthony Nutt was hit last year by his heavy weighting in banks, falling by 15% during the credit crunch. This year has not been much better, with a decline in line with the market, according to adviser Bestinvest.

Verdict: Have faith. Nutt has one of the best long-term track records, so if you are in for several years you can be confident he will ride out the storm.

Scottish Widows Corporate Bond

Bond funds are generally a safe haven in troubled times, but this £3.5 billion fund has lagged behind its peers, gaining just 1.4% compared with up to 6% for the best fund, according to Financial Express.

Verdict: Tom White at Bestinvest said: “This has a below-average record. Our rated alternatives include New Star Sterling Bond, Old Mutual Corporate Bond and Invesco Perpetual Corporate Bond.”

Newton Higher Income

Like Jupiter, this fund has fallen in line with the market since the start of the credit crunch with a decline of 15%.

Verdict: If you are already in, hold, but if you are considering it for new investments, advisers think there are better options in the equity income sector, such as Woodford’s fund (above).

M&G Recovery

Respected manager Tom Dobell has not escaped the effects of the credit crunch: his fund is down 11% over the past six months because of holdings in banks and commodity stocks.

Verdict: One for the bulls. If you have new money to invest and you think the market could rally later in the year, this fund is for you.

Dobell buys stocks that are not appreciated by the rest of the market, which could lead any bounce. White said: “Dobell’s long-term record is good and he is one of the strongest contenders for Anthony Bolton’s crown.”

Fidelity Special Situations

Manager Sanjeev Shah has been at the helm only since the start of the year, but he was managing the fund alongside Bolton for several months before that.

The fund’s performance during the credit crunch gives some hope that it has not lost its ability to beat the market: it has fallen 10% over the past six months, while the sector is down 13%.

Verdict: If you are an existing investor, advisers reckon it is worth giving Shah time to find his feet. However, if you have new money to invest, you should look at other funds such as Artemis Special Situations.

Norwich Property

The biggest commercial-property fund in the country has been hammered during the credit crunch, losing millions of pounds of investors’ cash. The value of its assets is also down around 20%.

Verdict: Thousands of people have piled into this fund and others like it on the back of a stellar performance during the bull market, and many will have far too much in the sector. If you are one of them, or you are close to retirement, it may be worth getting out now.

Several funds, including life funds managed by Friends Provident and Scottish Equitable, have imposed waiting limits before investors can get at their cash. Norwich Union has not followed suit, but it could do so in future.

Schroder UK Mid 250

Manager Andy Brough has a great long-term track record, but the performance of this £2.6 billion fund has tailed off in recent years.

Many analysts also expect it to struggle in future as large, high-quality firms are expected to trounce small and medium-sized ones in any downturn.

Verdict: White said: “Following a strong run for mid-cap stocks, we believe now is not the time for investors to add to their exposure.”

Best and worst UK funds

Best

Fund - Return*

Blackrock UK Abs Alpha 6.4%
Manek Growth 6.2%
Threadneedle Acceler -3.7%
JO Hambro UK Opps -4.0%
Newton Income -5.2%

Worst

Fund - Return

Sovereign Ethical -26.5%
Old Mutual Ethical -27.4%
New Star UK Spec Sits -28.9%
Standard Life UK Eq Inc -30.3%
Rathbone Special Sits -30.6%

*Since market peak on 15/06/07.
Source: Financial Express, Chelsea FS

Best and worst income funds

Best

Fund - Return*

St James’s Place UK High -4.9%
Threadneedle UK Equity -5.6%
Invesco Perpetual High -6.0%
Invesco Perpetual Inc -6.1%
Threadneedle UK Alpha -6.3%

Worst

Fund - Return*

Unicorn UK Income -21.3%
New Star Higher -21.5%
Axa Framlington Monthly -22.3%
Standard Life UK Equity -28.7%
Chelverton UK Equity -29.0%

*Since market peak on 15/06/07. Source: Lipper

Explore Money

• Property & Mortgages

• Savings

• Borrowing

• Investment

• Funds

• Insurance

• Consumer Affairs

• Tax

• Pensions

• Broadband

Times Recommends

• How to find a good tradesman
• How to join the internet vigilantes
• Five ways the banks fleece us