Nearly half the UK fund industry (46%) was found to be “closet trackers” compared to just 10% in the US, according to the research by SCM Private, a passive-only asset manager.

It claimed charges for actively managed funds were three times more than the typical index fund and that investors have lost out by an estimated £3bn over the last five years alone.

The report said that 88% of active funds in which the majority of the fund was found to be the index had underperformed, largely due to high charges.

Gina Miller, founder of SCM Private, said: “Our analysis shows that nearly half UK retail funds may have been misleading the public and breaching the UK regulator’s (FCA) over-riding principles that firms must ‘conduct their business with integrity, and communicate information in a way that is clear, fair and not misleading. We were shocked by the scale of what amounts to a giant con by the UK investment industry on the unsuspecting public.”

Miller, who also spearheads the True and Fair campaign, which is fighting for more transparent fund charges, said the “epidemic” could potentially be a larger issue than the PPI mis-selling scandal.

“This is yet another example of the lack of ethics in this crucial industry. In the PPI scandal people were sold insurance that they didn’t need – here they are being sold ‘active’ management that turns out to be an illusion,” she said.

However, Pete Chadborn, a financial adviser at Plan Money, said the report sounds like “scaremongering”.

He said: “While I agree with the sentiment that some active fund managers don’t deviate too much from the index and I acknowledge there needs to be more awareness about the issue if investors feel they aren’t getting value for money, this doesn’t even come close to PPI mis-selling.

“The danger with this scaremongering is that it suggests all fund managers are ripping people off which they are not.”