How are your investments doing? The latest Chelsea RedZone, which highlights funds that have underperformed, includes 143 that investors should think again about if they’re included in their portfolio. The funds highlighted contain almost £48.5bn of investors’ savings.
But of concern to many steady investors is the fact that 20 of them are tracker funds, which are supposed to reflect average market performance, rather than underperform it.
More than half of the total invested in the RedZone funds – accounting for some £26.82bn in just 34 funds - are those in the UK All Companies sector, the report says. Of these, 20 – accounting for £19.77bn of investors’ cash - are in passive funds. That's around 22 per cent of the 116 trackers available to UK investors, five of which are actually managed by State Street Global Advisers, the report points out.
Not only have these passive funds consistently underperformed the sector average, but all of them have underperformed their benchmarks, points out Darius McDermott of Chelsea Financial Services. “They are, after all, structurally designed to do so, as they are index returns minus fees,” he said.
A couple have underperformed by as little as 0.2-0.5 per cent, which you would expect, but five have underperformed their benchmark by more than 4 per cent over the three years, according to the research. The worst culprit highlighted in the RedZone is Families Charities Ethical, which returned 9 per cent less than the FTSE4Good UK 50 Index, closely followed by L&G (A&L) Capital Growth at 5 per cent.
Darius McDermott said: “There are good and bad tracker funds as well as good and bad managed funds, and they need just as much research before you invest.”
To see the full report, go to www.chelseafs.co.uk/redzoneReuse content