More than £21bn of investors’ money is still languishing in underperforming funds, but the amount invested in the worst 10 offenders has fallen in the past year, according to the latest Chelsea RedZone report
The triannual survey, seen exclusively by Investment Adviser, reveals that £377m now sits in the Chelsea ‘DropZone’ of the worst funds, compared with approximately £600m when the report was compiled a year ago.
This suggests that after years of letting money languish in poor-quality products, investors are finally switching to superior offerings, according to Chelsea’s managing director Darius McDermott.
“[Investors] are voting with their feet and assets under management in the 10 worst funds in the DropZone account for just £376.6m.”
The report compares funds’ performance against sector averages. It then labels those portfolios that have underperformed in each of the past three calendar years as RedZone products.
Then the funds’ cumulative returns are taken into account, as Chelsea compiles the DropZone list of the 10 worst performers.
Among the funds that were named and shamed in the report is UBS Smaller Companies, which in the past three years overall returned just 1.4 per cent – 44.1 percentage points lower than its IMA UK Smaller Companies sector average.
The Close Special Situations fund returned only 1.6 per cent – 43.9 percentage points below the IMA UK Smaller Companies sector average, Chelsea said.
Bryan Collings’ IM Hexam Global Emerging Markets fund lost 20.33 per cent in three years, according to Chelsea, meaning it was the third-worst performing fund. It underperformed the IMA Global Emerging Markets sector average by 33 per cent.
In terms of the volume of assets in RedZone funds, Scottish Widows was the worst offender, with £2.8bn in the RedZone. This was mainly due to the underperformance of the Halifax Corporate Bond fund, which had a huge £2.2bn of investors’ assets.
“Swip does not take surveys of this nature lightly. However it is worth noting that the funds detailed in Chelsea’s RedZone survey represent less than 2 per cent of Swip’s total funds under management”, said a Swip spokesperson.
Scottish Widows was followed by BlackRock, with £2.4bn across three funds, and Legal & General with £2.1bn, Chelsea said. In terms of sectors, Mixed Investment 20-60 per cent Shares had the most underperforming funds, with 13 in the RedZone.
This was followed by UK All Companies, which had 11, and Europe ex UK, which had nine.
