Data from Lipper has found only 52 per cent of funds available to investors in 2005 survived to the present day.
This means 48 per cent of funds have been merged or liquidated during the past decade, disrupting investors and skewing performance figures.
The Lipper statistics also show a wide disparity between fund groups, with Baillie Gifford having closed only one of its 23 funds in the past decade while Aberdeen Asset Management merged or liquidated 54 of its 72 funds.
Fund groups merge or close funds for a wide variety of reasons, such as a desire to combine products with similar strategies, a wish to close small “sub-scale” funds or it can be part of a rationalising after buying another company.
The number of closures and mergers, while being disruptive for investors in those funds, also raises an issue of “survivorship bias” in performance data, according to S&P Dow Jones Indices.
This refers to the tendancy for only successful funds to be around for long periods, which means when investors look at long-term fund sector averages, it can seem as if active funds outperform their passive peers.
Daniel Ung, director of research and design at the S&P Dow Jones Indices, said while the impact of survivorship bias is not huge, it does “skew the data upwards” for active management.
Additional supporting data came from S&P. Its latest S&P indices versus active funds (Spiva) report included data on the number of sterling-dominated funds that have survived the past 10 years.
S&P’s data found only 41.3 per cent of UK large-cap or mid-cap equity funds that were available 10 years ago were still in existence now. The figure was similar for European equity funds at 41.5 per cent, while US equity funds also recorded a survivorship rate of less than 50 per cent.
Mr Ung said he had been “quite surprised by the numbers”.
“Before this edition we had never looked at the 10-year numbers and while we were expecting [survivorship] to go down, the numbers surprised us,” he said.
Previous work had look at ten-year rates in the US market, and while suvirorship fell it was not to the extent seen in the sterling-domiciled funds.
“A lot of it will be due to funds not being successful so firms would close them for cost reasons,” he said.
Representatives from the five firms with the lowest survivorship rates for UK-domiciled funds said closures and mergers were a natural part of buisness processes.
Angus Woolhouse, global head of distribution at Baring Asset Management, which closed 18 of its 29 funds in the past decade, said: “We’re constantly reviewing our range to fit the current investor appetite and this has included making efficiencies to both our onshore range and broadening our range of offshore products available globally.”
A spokesperson for Insight Investment which closed or merged 33 funds and have a survivorship rate of 17.5 per cent, said: “We have worked extremely hard over the past decade to hone our wholesale fund range to focus on the things we do well.”
HSBC Global Asset Management closed or merged 27 funds and had a 46 per cent survivorship rate. A spokesman said it had conducted a “systematic review” of its fund range, while launching other strategies.
They added: “We keep our product suite under constant review and have a clear and deliberate strategy to manage our suite proactively as our clients’ needs evolve. That may mean merging or closing some funds, as well as launching new ones. This is clear evidence of the effectiveness of this strategy.”
Aberdeen Asset Management declined to comment. Premier said it had acted as an authorised corporate director in relation to some of the funds, meaning it had regulatory responsibility for them, but had not managed them.