Chelsea Financial Services' research has revealed over £20bn worth of assets sit in funds consistently performing poorly for investors.
In its June Relegation Zone analysis, Chelsea identified £21.5bn of assets sitting in underperforming vehicles – with £5.32bn from the UK Equity Income sector.
The largest casualty is the Newton Higher Income fund, with £2.86bn under management; followed by the Scottish Widows Corporate Bond fund (£2.67bn) and the HSBC Growth & Income fund (£898.1m).
Chelsea says the “normally solid” income stocks, such as banks, have been hit hard by the credit crunch – leading the sector to underperform the FTSE All-Share by 12.7% over one year.
The analysis also shows the FTSE 100 suffered its worst first-quarter performance since launch 24 years ago.
Chelsea has also named its “habitual offenders”; funds unable to rise above the mire since March 2006.
The underperformers are:
- Norwich Union – UK Smaller Companies
- MLC Trust Management Companies – High Income
- Royal Liver Asset Management – UK Fixed Interest
- CIS European Growth
- Lincoln UT Mgrs – Global
- Scottish Widows – Global Growth
- Scottish Widows – Opportunities Portfolio
Chelsea says these fund houses may need to bite the bullet and take action to arrest the poor performance.
“Take Fidelity for example, after a period of sustained underperformance on their UK Aggressive and UK Growth funds they replaced both managers in a bid to inject some life into those torpid portfolios,” it says.
“Four months later, and they have re-shuffled two other struggling funds (UK Growth and Income and UK Income Plus), both managed by John Stavis.
“Time will tell if the replacements can lift these funds out of the doldrums but we applaud the recognition that fund management groups must do something about consistently underperforming funds.”IFAonline
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