More Jupiter funds enter RedZone

Jupiter has the second-largest number of funds in Chelsea Financial Services’ latest RedZone report, which aims to highlight portfolios that have consistently underperformed their sector averages for three discrete years in a row.

Mayfair-based Jupiter only had two funds in Chelsea’s previous report in October 2014, but that has now risen to five – a development referred to by Chelsea managing director Darius McDermott as a “surprise”.

Featuring in both reports are John Chatfeild-Roberts’ £686m Merlin Worldwide fund and Rhys Petheram’s Jupiter Corporate Bond fund.

The new entrants to this latest report are Gregory Herbert and Cédric de Fonclare’s £55m Jupiter European Income, Simon Somerville’s £500m Japan Income and the £57.6m Jupiter UK Smaller Companies fund run by Richard Curling.

“It’s a surprise to see the funds on the list,” Mr McDermott said. “None of them have done that badly, but they have all underperformed by about 10 per cent.”

He was most surprised to see the European Income fund on the list, given his conviction about the strength of the duo.

However, the fund ranks in the bottom quartile of its peer group during the past three years. It delivered 40.8 per cent compared with the 48.7 per cent returned by the Investment Association (IA) Europe excluding UK sector, according to the fund’s January factsheet.

Mr McDermott is still confident in Jupiter and noted that the asset manager was “well represented” on Chelsea’s buy lists.

A Jupiter spokesperson said: “While it isn’t what anyone would want, most active managers will have a period of underperformance.

“There are often specific reasons for this that cannot be drawn out by simply looking at the performance for any given year.”

Jupiter was not the only group to receive a mention in the report. Both HSBC and Santander had five funds on the list, behind Aberdeen, which topped the list for the second time in a row with 10 funds in the RedZone – three more than October’s report.

Mr McDermott said: “I have a soft spot for the people at Aberdeen, but I wonder if they have bitten off more than they can chew [with the recent acquisition of Scottish Widows Investment Partnership] to the detriment of their investors.”

Still, the firm has had two of its funds added to the DropZone – the worst-performing funds in the RedZone.

The Aberdeen World Equity Income and Aberdeen European Smaller Companies Equity funds are at seventh and eighth respectively in the DropZone.

The former has underperformed the IA Global sector by 30.5 per cent in the past three years, while the Aberdeen European Smaller Companies Equity has underperformed the European Smaller Companies sector by 26.3 per cent in the same period, according to Chelsea.

An Aberdeen spokesperson said it had been a “tough time” for some of its equity funds, but its approach would “shine through in the long term”.

A Santander spokesman said comparing its Enhanced Income funds with total return funds was “not fair”, adding it had recently hired Graham Ashby to manage two of its other funds on the list.

The changing face of the Chelsea RedZone

There are some stubborn trends in the latest RedZone report from Chelsea Financial Services, but also some signs of hope.

Aberdeen has found itself at the top of the list of underperforming funds for the second time in a row – even though Chelsea has not taken into account those it has bought from Scottish Widows Investment Partnership, which previously dominated the list.

The Scottish group, as well as Jupiter and chief investment officer John Chatfeild-Roberts, will be hoping to escape the reach of the RedZone soon.

But the amount of assets has fallen substantially from £46bn to £34bn. Also, the total assets in poor-performing UK equity funds has almost halved since the previous RedZone report, thanks largely to the £8bn BlackRock UK Equity Tracker no longer making an appearance.

Old Mutual Global Investors’ Global Equity Income fund has also found its way into the DropZone – the list of 10 funds that have underperformed their peer group by the most. The fund is run on an outsourced basis by O’Shaughnessy Asset Management.

In addition, just six funds seem to have lost money in the period under consideration, the obvious impact of the bull market in equities and bonds of late.