Time to vote with your feet? Billions languishing in underperforming investment funds

23rd February 2015


Thousands of investors are missing out far better returns by leaving their hard-earned cash in funds, which consistently disappoint.

Research from fund broker Chelsea Financial Services has highlighted that £34bn’s worth of investors’ cash is presently sitting in persistent underperformers.

The firm’s RedZone report names and shames the worst-performing funds over three years while its DropZone names the portfolios which have underperformed their sector averages by the largest amount over the period.

See the full list: RedZone Table

The good news is that since the broker’s previous update in September the total amount of money held in underperforming funds has fallen quite substantially, down from £46bn to £34bn.

But Darius McDermott, managing director at Chelsea Financial Services said: “However, there are still 156 perennially underperforming funds on the list – this is far too much investor money underperforming for far too long.”

In addition, not much has changed since September in terms of names. Aberdeen is still top of the list in terms of number of funds, having added three more now, taking their total to 10.

These funds are all Aberdeen’s own – as Chelsea has not taken into account the 40 odd it has taken on, with the recent acquisition of Scottish Widows Investment Partnership (SWIP).

Aberdeen is followed by HSBC, Jupiter and Santander with five funds apiece.

McDermott said: “In terms of sectors, UK All Companies is once again home to the largest number of underperforming funds – 33 in fact. It is followed by Global, with 14 and Mixed Assets 20-60% Shares, with 12.

“However, the amount of money languishing in badly-performing UK equity funds has almost halved since the last RedZone, helped in no small part by the fact that the £8bn BlackRock UK Equity Tracker is no longer making an appearance.”

Time for review

The DropZone, a list of the worst of the worst from the RedZone, has a familiar feel to it as well, with no change amongst the top three. McDermott noted that SF Webb Capital Smaller Companies Growth remains in first place, but on a positive note, it has continued its slow progress in turning things around. CF Lacomp World is second, while FP Hexam Global Emerging Markets lies in third.

The DropZone:

(% underperformance from sector average*)

1.      SF Webb Capital Small Cos Growth 106.25

2.      CF Lacomp World 42.23

3.       FP HEXAM Global Em Mkts 39.76

4.      Elite Charteris Premium Income 38.37

5.      M&G Recovery 33.28

6.      TM Progressive UK Sm Cos 30.98

7.      Aberdeen World Equity Income 30.50

8.      Aberdeen European Sm Cos Equity 26.32

9.      Old Mutual Global Equity Income 25.80

10.  Neptune European Opportunities 25.44

*(Based on three-year cumulative performance – all data sourced from FE Analytics)


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