The study comes as Nomura downgraded the European telecoms sector, and named the company among its least favourite stocks.
"The precedent of telecom performance in inflationary environments is not encouraging, and austerity and regulatory headwinds point to weakening growth in 2011," its analysts said in a note.
A statement from the Bank of England this week showed that Briton's inflation expectations have hit their highest in two years. A survey from the Bank showed investors expected consumer prices to increase by 3.9 per cent over the next year, the highest reading since August 2008. Meanwhile, inflation hit a six-month high of 3.3 per cent this week, staying high above the two per cent target.
Funds with weighting to BT
| Fund |
Weighting to BT |
| CF Walker Crips UK High Alpha |
5.7 |
| Elite Henderson Rowe Dogs FTSE 100 |
7.24 |
| GAM UK Diversified |
5.1 |
| Invesco Perp Childrens |
6.26 |
| Invesco Perp UK Growth |
6.48 |
| Threadneedle UK Equity Alpha Income |
6.7 |
Source: Financial Express Analytics
Financial Express data shows six funds have significant holdings in BT Group, and all but one of the funds with BT in their top ten holdings have lost money for investors in the three years to 30 November 2010.
Performance of funds with BT holdings over 3-yrs
Source: Financial Express Analytics
Elite Henderson Rowe Dogs FTSE 100 is the worst offender, losing 30 per cent in the period. Invesco Perpetual's UK Growth fund is another dog, losing 17.2 per cent.
But the managers defended their holdings, saying BT could be good for income.
"The BT holding is a reflection of the fund's strategy, which is to hold the 15 highest yielding FTSE 100 stocks," Elite Henderson Rowe Dogs FTSE 100 manager Giles Rowe said.
He added: "As BT is out of favour it provides a better yield."
Defying the odds is the Walker Crips UK High Alpha fund, which has returned 12.3 per cent over the three years. It also trounced its IMA UK All Companies sector, which lost 2.23 per cent over three years. Walker Crips manager Jan Luthman still favours BT despite the warning from Nomura, saying it has great potential for growth.
"We're big inflation worriers, but BT's price is driven by regulators. We're enthusiastic about the company’s global growth in data traffic," he said.
He added: "I'm also optimistic on the prospects for its pension deficit. Long bond yields are picking up, and equities are resilient, which will help cut the deficit."