Close to 70 funds at risk of closure this year

As many as 67 UK-registered funds could be in danger of being closed or merged away this year, research conducted for Investment Adviser’s Mid-Year Monitor has revealed.

The 38.86 per cent rise in the number of “red flag funds” is not surprising given the volatility in the markets in the second half of 2011.

The 2012 list of ‘red flag funds’, which will be published as part of a report on Monday (21 May) in Investment Adviser and on FTAdviser, manage an average of £6.2m each and includes nine from the UK All Companies sector.

However, the IMA’s three former Managed sectors have the most flagged funds combined, with seven in Mixed Investment 20-60 per cent Shares and four each in the Mixed Investment 40-85 per cent Shares and five in the Flexible Investment sectors.

Meera Patel, senior analyst at Hargreaves Lansdown, said: “For a long time I’ve felt there are too many failing funds in the market and more should be done to consolidate them. For funds that are small in size, I feel more groups should be willing to merger or close these funds.

“Small funds are costly to run and it’s the investor that pays for these high charges in most cases, so it is not in their interests to keep these funds open, unless the groups can guarantee the size will grow and the charges fall.”

Funds on the “danger list” include products from Marlborough, Franklin Templeton and Scottish Widows Investment Partnership (Swip).