Last year more than 100 unit trusts were either merged or liquidated as fund management houses sought to clean up their product ranges ahead of the Retail Distribution Review (RDR).
A number of fund groups announced plans to focus on ‘core areas' - Aviva Investors, Alliance Trust, and SWIP were among those closing down funds which had proved unpopular with investors.
The vast majority of funds liquidated or merged last year underperformed the average fund return in their respective sector over one-, three- and five-year time frames.
For instance, the average return of the 15 funds closed last year in the IMA Global sector over three years was 0.11%, well below the sector average return of 30.11%, according to Lipper.
Ten funds cut down in their prime
However, Lipper data compiled for Investment Week shows a number of funds which produced stellar performance over a three-year investment horizon were also liquidated in 2012.
Lipper analysed three-year fund returns to 31 December 2011 for all the funds which were either merged or liquidated in 2012.
Majedie Asset UK Opportunities fund was closed in December after assets fell below the £20m mark. However, over three years the fund had returned an impressive 83.14%, ahead of the IMA UK All Companies sector return of 42.07%.
Henderson Managed Distribution fund, which was last year merged into the firm's Cautious Managed fund, returned 57.93% over three years, while the Mixed Investments 20-60% Shares average return stood at 23.23%.
Another Henderson offering which was merged last year, the Henderson UK Strategic Capital fund, completes the top three.
The fund returned 70.62% on a three-year view, beating the IMA UK All Companies sector return of 42.07%.
Ed Moisson, head of UK & cross-border research at Lipper, said cost pressures has forced a number of fund houses to close or merge funds, even those which were ranked in the first or second quartile of their peer groups.
"The data shows there are cases where funds have performed relatively well,but for business reasons have been closed over and above performance," he said.
"It is perhaps no surprise to see a number of UK All Companies funds being closed or liquid, despite performance holding up well, as the asset class has been out of favour during the past couple of years."
Top ten funds cut down in their prime
|Fund name||Merged/liquidated||Fund return over three years (%)||Sector average return over three years (%)|
|Majedie Asset UK Opportunities||Liquidated - 21/12/2012||83.14||42.07|
|Henderson Managed Distribution fund||Merged - 20/07/2012||57.93||23.23|
|Henderson UK Strategic Capital fund||
|Pru Growth Trust||Liquidated - 17/02/2012||47.6||29.89|
|Newton Phoenix Income||Liquidated - 17/02/2012||37.6||23.23|
|Legal & General Managed Income Trust||Merged - 23/01/2012||38.67||26.89|
|Aviva Investors Global Return||Liquidated - 23/07/2012||40.71||29.89|
|Newton Oak||Liquidated - 30/04/2012||40.41%||29.89%|
|CF Taylor Young Growth||Merged - 27/07/2012||50.32%||42.07%|
|INSYNERGY Odey||Merged - 19/12/2012||36.33%||28.45%|
Data for 31/12/2008 to 31/12/2011
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