Poor fund performance is on the rise, with the total assets in the Chelsea RedZone list of the worst-performing funds more than doubling in the past three months.
Funds in the latest RedZone, which lists the worst funds in each sector over the past three years, have risen from almost £48.5bn in May to £101.5bn at the end of August. The number of funds named and shamed has risen from 143 to 239, which Darius McDermott, managing director of Chelsea Financial Services, says is “a worrying sign”.
With 44 funds on the list and a third of the assets at £36.63bn, UK All Companies was the worst-performing sector, with trackers the main culprit, representing 27 funds and assets of £27bn. This marks an increase of 20 and £20bn respectively on three months ago.
“While it’s easy to knock passives, the difference between good and bad active management is worth highlighting,” McDermott says. “Take the IA Asia ex Japan sector, for example. The worst fund, Tiburon Taipan, lost 10.97 per cent, whilst the best fund, Elite Rated JOHCM Asia ex Japan Small & Mid Cap, returned 49.74 per cent. On a £15,000 ISA investment that’s the difference between having a savings pot today of £13,354 or £22,461.”
The SF Webb Capital Smaller Companies Growth fund took top spot in the DropZone, which highlights the funds that have underperformed their sector averages the most over three years, falling short of the sector average by 88.43 per cent.
The best-performing sector over the past three years was IA UK Smaller Companies, up 62.21 per cent, while Legg Mason topped the fund leader board with the two best-performing funds, Legg Mason IF Japan Equity, up 122.47 per cent, and US equity fund Legg Mason Opportunity, up 119.79 per cent.
“Smaller companies (with the exception of the Webb Capital fund), all over the globe, really have been the place to be over the past three years,” McDermott adds. “It’s a theme that runs through every part of this data.”