Lesser known fund houses consistently outperform the investment world's big names, according to a new ratings system.
Dozens of funds promoted by giant brands including Scottish Widows and the world’s largest fund management firm, Fidelity International, are returning well below expectation, and reputation, according to the system.
It has been devised by online ratings company Moneyspider.com, which rates from A – best - down to E – worst - performing funds, based on a combination of one, three and five year performance.
It considers each fund against four different parameters, including its sector, all-funds, and FTSE ranking, as well as its performance against cash.
According to Moneyspider, Scottish Widows, Standard Life, Henderson Global Investors, Legal & General, Invesco Perpetual, F & C and Fidelity all feature prominently in the lowest performance ratings.
It says Scottish Widows has the dubious distinction of having the largest number – 20 out of a total of 38 (52%) – of funds with D and E ratings.
Standard Life Investments, with 40% of its funds in the lowest ratings, while Legal & General – one of the UK’s biggest ISA providers, has nearly a third, 32%, of its funds relegated to the reject pile.
Of a total 32 UK retail funds offered by Fidelity Investments, the world’s biggest fund management house, 25% carry D and E ratings.
Tony Aherne, of Moneyspider, says: “Investors are constantly being short-changed by funds promoted by many of the largest fund management houses, which spend heavily on marketing but consistently struggle to deliver the goods with a number of their funds.
“But there are well over 2,000 funds available, with many small and little known funds such as Rathbone, First State, St James’s Place and Artemis turning in consistent A and B ratings.
“Despite recent falls in world stock markets as a result of the sub-prime mortgage crisis and resultant credit crunch, longer term investment planning is a solid and proven strategy for inflation beating returns.
“But investors are far too often left in the dark by their fund managers.”
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