Chelsea highlights £26bn of underperforming funds
Darius McDermott, managing director of London-based Chelsea Financial Services, said that investors were pouring money into a "growing list of laggards" and that "far too much money has been underperforming for too long".
His comments came as Chelsea published its latest Relegation Zone research, which lists consistently underperforming funds. According to the data, the assets under management in funds that have been underperforming over a three-year period has swelled since December by more than £7.5bn to £26bn, a rise of 41 per cent.
Mr McDermott said: "The number of entries to the league of serial underperformers has increased by 9 per cent. One fund alone has raked in more than £4bn in assets despite trailing some distance behind its peers in performance tables."
The market has gained 6 per cent since Chelsea last published its half-year Relegation Zone data but the number of underperforming funds has risen to 94 from 86.
The survey said: "The rise in assets under management in the Relegation Zone can be largely attributed to a number of new entrants with assets of more than £500m. In the previous Relegation Zone there were four funds with more than £500m under management. Now there are 13.
"The combined total of these 13 funds alone comes to a whopping £18.19bn. The names of many of the fund management groups who run these funds will be familiar to regular readers of the Relegation Zone. Life insurers and banks are the principal culprits."
Mr McDermott warned investors about the Investment Management Association's Cautious Managed sector. He said that despite the explicit cautious label, the name should not be taken literally. He said the funds were allowed to invest up to 60 per cent in equities and at least 30 per cent in fixed interest and cash.
The research urged savers to scrutinise cautious managed funds before investing. It said: "The sector is a spread of multi-asset, multi-manager and asset allocation funds with varying degrees of risk. This is not what many cautious investors may have bargained for in terms of risk.
"This is all too evident in the performance of a number of cautious managed funds. Of the 10 cautious managed funds listed in the Relegation Zone, seven have lost money in three years. If you make an investment in the cautious managed sector, take a good look under the bonnet of any fund before purchasing."