The report identifies worst-performing funds over the past three discrete years, all producing third or fourth quartile returns each year.
UK All Companies had some 50 funds named and around a third of the assets at £33.7bn ($48.7bn, €43.5bn). The number of funds was up from 44 but total assets was down slightly from £36.6bn. Index-tracking funds accounted for the majority of the culprits.
Global sector hit
The Global sector was the next worst performer with 40 funds finding themselves in the redzone, significantly up from 24. The North America sector came in third with 16 funds in the redzone and £2.76bn in assets.
Aberdeen Asset Management’s woes continued, with 46 funds in the redzone accounting for £30.75bn. Legal & General was second with eight funds and £9.12bn and NFU Mutual is third with seven funds and £1.13bn. PIMCO had only four funds in the redzone, but they were all large so the firm was the second worst performer by assets with £15.98bn.
Small fund concern
According the Chelsea’s managing director Darius McDermott a notable development is smaller funds becoming more prevalent in the redzone.
“A new trend I have noticed is that there are a large number of tiddlers amongst the redzone funds [33],” he said. “By tiddlers I mean funds which have £10m or fewer assets under management. These include a couple of ‘ranges’: Barclays Wealth Global Markets 1, 2, 4 and 5 and PFS Momentum Factor 2, 3 and 4.
Funds of this size are generally more expensive for investors as they are not large enough to enjoy economies of scale and these costs can weigh heavily on performance.
For the fund management company, they are also not a viable proposition as they don’t generate enough income. Unless the fund management company believes they can gather new assets in a reasonably short period of time, they usually get wound-up or merged with other funds. Investors may want to pre-empt this move by taking action themselves,” McDermott added.
The full redzone list can be viewed here.
