Investments 

Zurich withdraws three M&G funds over poor performance

Zurich has removed three M&G funds from the range it offers new customers through its Sterling platform and wrappers, due to persistent below expectation performance, FTAdviser can reveal.

According to a statement to investors seen by FTAdviser, the M&G Global Basics fund, the M&G Recovery fund and the M&G Managed Growth fund are being removed from Zurich’s Sterling Bond, Sterling Isa and Sterling Investment Account.

Existing investors are not being made to switch out of the funds, but they will not be available for new investment. The three funds will still be available through the Zurich Intermediary Platform.

A spokesperson for Zurich told FTAdviser that the reason for the removal of these funds was that “their performance have not been in line with expectations”.

The spokesperson added: “Existing customers will be notified of the decision but can remain invested in the funds and continue to make regular contributions into them if they wish to.”

“We write to customers and advisers to let them know about the closure and it then up to them to take action if they want to.”

Zurich said of the M&G Global Basics fund in its note to investors: “As a result of [our] funds governance process, we have decided to remove M&G Global Basics from the fund range we offer new customers as the fund has failed to meet the performance targets set by the manager over an extended period.”

M&G admitted in a note to investors, which was distributed by Zurich, that the returns on the M&G Global Basics fund “have been disappointing”.

The note said: “A lack of confidence in emerging markets, poor shareholder returns from the mining industry and a couple of stock specific issues, notably UK-listed security services outsourcer G4S, all contributed to the poor performance in 2012 and 2013.

“Longer term, we believe performance will turn around. Growth in emerging markets represents the best opportunity for equities - and valuations across the fund look attractive both on an absolute and relative basis.

“This is particularly true versus pockets of the market that have been strong, notably the US and large, safe, dividend-paying equities.”

Paul Lindfield, director of wealth management at Sedulo Wealth Management, said that the firm had put the M&G Global Basics fund “on watch” six months ago and it is being reviewed on an ongoing basis.

He said: “I can understand Zurich’s viewpoint and position but I think it should be up to the adviser whether or not to switch or deselect a fund.

“I have got quite a few clients through them in the [M&G] Global Basics. When markets and equities are booming it’s top of its game but it is a tale of two stories. When it’s up it’s up and when it’s down its fourth quartile.”

Mr Lindfield added that he has starting moving clients out of the M&G Recovery fund, with some of them going into Ecclesiastical and Schroders’ recovery versions instead.

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