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Revealed: UK’s worst performing funds over three years

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15/06/2015
Investors are holding almost £48.5bn in underperforming funds, according to Chelsea Financial Services, with £20bn sitting in passive products.

There are 143 funds in the latest Chelsea RedZone, the group’s list of the funds which have severely lagged peers over the past three years.

A total of 34 funds are in the UK All Companies sector and of these, 20 are passive funds. That accounts for around 22 per cent of the 116 trackers available to UK investors, five of which are managed by State Street Global Advisers.

These funds have consistently underperformed both the sector average and their benchmarks. A couple have underperformed by as little as 0.2-0.5 per cent, but five have underperformed their benchmark by more than 4 per cent over the three years.

The worst culprit is Families Charities Ethical, which returned 9 per cent less than the FTSE4Good UK 50 Index, closely followed by L&G (A&L) Capital Growth at 5 per cent.

Darius McDermott, managing director of Chelsea Financial Services, said: “In the Passive vs Active debate, we acknowledge that there are good and bad fund managers, and our business reflects that – we have a research team, who spend their time finding the fund managers who we think can consistently outperform in any reasonable time period, while the RedZone highlights the ones which have shown they don’t have this ability. But there are good and bad tracker funds too and they need just as much research before you invest.”

With seven funds, Aberdeen has the highest number of underperforming names in the latest RedZone.

Joining them with the same number of funds are Thesis and BlackRock. In terms of assets, however, BlackRock moves up to top spot with £10.64bn, most of which (£8.46bn) is invested in the UK Equity Tracker. M&G is second with £7.87bn and L&G third with £7.37bn.

The Chelsea RedZone names and shames the worst-performing funds over the last three discrete years. Each fund in the list has produced third or fourth quartile returns each year.

SF Webb Capital Smaller Companies Growth remains the worst performer although the manager continues to slowly claw back performance. The last time the report was published the underperformance was 106 per cent compared with 96 per cent today.

Similarly, First State Global Resources fund has produced poor performance over the past three years, some 69.1 per cent below the sector average.

McDermott added: “First State Global Resources has been hit by the slump in oil price and commodities in general. Sitting as it does in the wider Global sector, the underperformance is magnified considerably.

“The biggest disappointment for me, however, was the new entrant at number 10, Troy Trojan. The manager, Sebastian Lyon, has been extremely bearish in recent years and currently has around 20 per cent in cash and 10 per cent in gold bullion, which has really hurt the fund.

“He is convinced a market slump is imminent, however, and the portfolio is positioned to cushion against this occurrence. I wouldn’t write the fund off just yet – the manager has an outstanding long-term record and may yet be proved right – but it’s one to monitor closely.”

Ten worst performing funds over the past three years

Fund % underperformance
from sector average (per cent)
   
SF Webb Capital Smaller Companies Growth 96.6
First State Global Resources 69.17
HC FCM Salamanca Global Property 65.45
Elite Charteris Premium Income 40.22
FP HEXAM Global Emerging Markets 35.28
M&G Recovery 32.71
Aberdeen World Equity Income 31.08
Newton Oriental 25.94
Templeton Global Emerging Markets 24.87
Troy Trojan 23.77
Source: FE Analytics

 

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