Red Zone

Following its purchase of Scottish Widows, Aberdeen has the largest number of underperforming funds. By assets, however, BlackRock wins hands down, with £8.4 bn* of assets in the RedZone.

Click on the image below to see the full RedZone:   

      And here's the DropZone:  

                       

Having completed its purchase of Scottish Widows Investment Management (SWIP) in April this year, Aberdeen has already rescued seven funds from the RedZone, with the migration of all SWIP-run active equity funds to the Aberdeen team. Four passive strategies remain, however, along with three of Aberdeen’s own funds, and Aberdeen tops the table with regard to the largest number of underperforming funds, so the turnaround job is far from over.

Fidelity and Investec come in joint second, with six funds apiece. In terms of assets, BlackRock is top with £8.4 bn in the RedZone, followed by M&G with £7 bn and Newton with £3.3 bn.

Worst performing fund
The single worst-performing fund over the past three years is still SF Webb Capital Smaller Companies Growth. £10,000 of your hard-earned cash, invested in this fund three years ago, would have shrunk to just £4,919.65 today. Putting the money in the average fund in the sector would have, in contrast, returned £16,035.48. If you had been fortunate enough to pick the best fund in the sector, R&M UK Equity Smaller Companies, you would be sitting on an investment worth £22,626.58. That’s quite a difference.

Darius McDermott, managing director of Chelsea looked specifically at the UK All Companies sector, explaining that “almost half (£20.34 bn) of this RedZone’s assets are in the UK All Companies sector, which is also home to the largest number of underperforming funds (26). Mixed Investments 40-85% shares is next with £5.05 bn and 14 funds, followed by Flexible Investments with £812 mn spread across 12 funds (at seven, the Strategic Bond sector has fewer funds, but more assets at £2.9 bn).

Perhaps unsurprisingly, given the company figures above, two UK equity funds account for two-thirds of the underperforming UK All Companies assets. BlackRock UK Equity Tracker at £8.26 bn and M&G Recovery at £6.35 bn. We were a supporter of Tom Dobell, manager of M&G Recovery for many years and it is sad to the fund languishing so badly.”

Unclassified sector needs an overhaul
The Chelsea RedZone doesn’t include one or two sectors, which are impossible to compare in any meaningful way: namely the Specialist and Unclassified sectors. The latter, however, is starting to cause concern. No fewer than 26 of the funds in the initial analysis (12%) were taken out of the final cut as they have been moved to the Unclassified sector. This mish-mash sector now contains 95 funds, which fund companies claim don’t ‘fit’ anywhere else. We are of the opinion that the Investment Management Association need to take a closer look. Some may well be in the only suitable place, but I can’t help but think that for others, it’s nothing more than a hiding place.

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Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time.