Rare rise in funds at risk of closure

This article is part of
Summer Investment Monitor 2017

Jupiter points out environmental investing “is a relatively niche area” and this is a specialist fund within the firm’s broader £883m environmental and sustainability strategy. The Marlborough Emerging Markets fund has also reappeared, although the firm notes a new investment team took over just over four years ago and performance has improved. 

Among entrants to the list is the SLI Short Term Money Market fund, which the firm says is not actively marketed and is generally used by investors in other funds as “a very short-term holding entity”. It adds: “We regularly review funds and our internal governance processes recently instigated an assessment of this offering.”

Margetts Opes Income is another entrant, although Wayne Buttery, fund manager at Margetts Fund Management, points out the Flexible Investment sector “houses very diverse funds with totally different investment objectives”, and adds the fund “easily meets the investment criteria stated in the fund objectives.”

The MFM UK Opportunities fund makes it onto the list despite its one and three-year performance being top quartile in its peer group. Oliver Brown took over as lead manager in 2013 and notes the fund is “unique in many ways”, underpinned by an “individual investment process”. The fund is currently profitable. 

The Old Mutual Global Bond also makes it first appearance, although Warren Tonkinson, managing director at Old Mutual Global Investors, notes in 2016 the firm appointed Mark Nash and Nicholas Wall to enhance the fixed income capability, adding: “As they start to gather momentum we would expect this global fixed income fund to see better performance and attract more assets.”

Nyree Stewart


2017 Red Flag Funds: Expert view

Adrian Lowcock, Architas investment director, says:

“Looking at this list there are a lot of boutique fund groups, which might go some way to explaining why they haven’t been soft closed. It will undoubtedly be harder for a boutique to close a fund as they don’t necessarily have larger strategy to support the business. At the same time there is a mix of funds from larger groups, but these are mainly in areas for which the group is not as well known and probably therefore doesn’t have the expertise to compete with the more established and better-performing funds. 

“The industry – and indeed investors – needs new fund launches to create opportunities and bring in new managers, but there needs to be better discipline on closing unsuccessful products. Closing a fund is often the right thing to do for investors as well as for the company.  But it isn’t a straightforward blanket approach; some strategies take time to come to fruition, while others may always be niche products. Ultimately, a style or asset class might just be out of favour and investors need to wait. The issue is funds under £10m tend to be expensive to run as there are plenty of fixed costs. Investors need to look out for themselves and review if they have any of these holdings and consider cheaper alternatives.”