15th June 2015
Investors collectively have a massive £48.5bn languishing in underperforming funds with the majority of the cash invested in poorly performing UK portfolios.
The latest ‘RedZone’ update from broker Chelsea Financial Services, which names and shames the worst-performing funds over the last three discrete years, shows that there are now 143 investment vehicles failing investors over the analysed period.
In terms of actual groups, Aberdeen is still top with seven funds in the RedZone. Joining them with the same number of funds are Thesis and BlackRock. In terms of assets, however, BlackRock moves up to top spot with £10.64bn, most of which, at £8.46bn is invested in the UK Equity Tracker. M&G is second with £7.87bn and L&G third with £7.37bn.
More than 55% of the assets on the overall list at £26.8bn, are in the UK All Companies sector and, of these, no fewer than 20 are in passive funds, five of which are managed by State Street Global Advisers.
Sector-wise, after UK All Companies comes the Mixed Assets 40-85% Shares sector followed by the Flexible Investments.
The study highlighted that while the passive funds it examined consistently underperformed their benchmarks, as they are structurally designed to do so, as they are index returns minus fees but a number have underperformed by more than 4% over the three years.
The RedZone earmarked the worst culprit as Families Charities Ethical, which returned 9% less than the FTSE4Good UK 50 Index, closely followed by L&G (A&L) Capital Growth at 5%.
Chelsea Financial Services managing director Darius McDermott said: “In the Passive vs. Active debate, we acknowledge that there are good and bad fund managers, and our business reflects that – we have a research team, who spend their time finding the fund managers who we think can consistently outperform in any reasonable time period, while the RedZone highlights the ones which have shown they don’t have this ability. But there are good and bad tracker funds too and they need just as much research before you invest.”
|Rank||Fund||% underperformance from sector average*|
|1st||SF Webb Capital Smaller Companies Growth||96.6%|
|2nd||First State Global Resources||69.17%|
|3rd||HC FCM Salamanca Global Property||65.45%|
|4th||Elite Charteris Premium Income||40.22%|
|5th||FP HEXAM Global Emerging Markets||35.28%|
|7th||Aberdeen World Equity Income||31.08%|
|9th||Templeton Global Emerging Markets||24.87%|
|*Based on three-year cumulative performance|