Isa warning as Fidelity tops list of underperformers
Fund management group Fidelity has topped a list of funds that have seriously underperformed in the last three years, according to Chelsea Financial Services.
There are 151 funds in the latest Chelsea 'RedZone', in which investors have ploughed almost £35 billion. Fidelity has the highest number of funds in the RedZone of any fund management group, with eight underperformers.
However, Chelsea said the worst-performing fund over the last three years is the SF Webb Capital Smaller Companies Growth fund, which has returned 112% less than the Smaller Companies sector average.
This translates to losses of almost 60% compared with average gains of 50% in the sector.
The Chelsea RedZone names and shames the worst-performing funds over the last three discrete years. It has been published at a time when hundreds of thousands of investors will be choosing which funds to invest their Isa money in before the tax year deadline of 5 April 2014.
Darious McDermott, managing director of Chelsea Financial Services, said: "It saddens us that the flagship Fidelity Multi Asset Strategic fund, managed by Trevor Greetham, stubbornly refuses to leave the RedZone, this being the third consecutive time it has appeared.
"It is also a shame to see Fidelity UK Growth, Fidelity UK Select and Fidelity European Opportunities, run by the veteran Colin Stone, on the list. Fidelity UK Growth was a serial offender for many years, before the current manager, Tom Ewing, took the fund on and managed to turn performance around.
"However, it seems it is once again hitting problems. Hopefully Fidelity will concentrate their efforts into getting their RedZone managers get back on track without delay."
CFS also operates a 'DropZone', which highlights funds from the RedZone that have underperformed their sector averages by the largest amount over the cumulative three-year period. Topped by SF Webb Capital Smaller Companies Growth fund, this list also includes Manek Growth fund and SVM Global Opportunities.
The Dropzone in full, along with how much they underperform their respective sectors, is as follows:
1. SF Webb Capital Smaller Companies, 112.11%
2. Manek Growth, 66.63%
3. SVM Global Opportunities, 47.69%
4. FP HEXAM Global Emerging Markets, 29.81%
5. CF Lacomp World, 29.41%
6. SWIP UK UK Opportunities 27.59%
7. Ignis UK Focus, 27.33%
8. F&C UK Alpha, 26.55%
9. WDB Assetmaster Global Thematic, 25.67%
10. Marlborough UK Primary Opportunities, 25.4%
All investment returns are measured against a benchmark to represent “the market” and an investment that performs better than the benchmark is said to have outperformed the market. An active managed fund will seek to outperform a relevant index through superior selection of investments (unlike a tracker fund which can never outperform the market). Outperform is also an investment analyst’s recommendation, meaning that a specific share is expected to perform better than its peers in the market.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.