Chelsea RedZone: £110bn sitting in worst-performing funds


Total assets in the Chelsea RedZone list of the worst-performing funds has grown by £10bn since October 2015.

The number of funds in the latest RedZone, which lists the worst funds in each sector over the past three years, has risen from 239 to 259 since October, with assets growing to £110bn.

With 50 funds on the list and a third of the assets at £33.7bn, UK All Companies was the worst-performing sector.

Global follows the UK All Companies sector on the list, with 40 funds, up from 24, and £11.95bn in assets, up from £6.96bn.

North America is a newcomer in the RedZone and comes third with 16 funds and £2.76bn assets.

Looking at companies, Aberdeen’s woes continue, says Darius McDermott, managing director of Chelsea Financial Services, topping the RedZone list with 46 funds and £30.75bn.

The emerging market-focused company was followed by Legal & General with eight funds making up £9.12bn in assets. Pimco had only four funds in the RedZone, but was one of the worst companies with £15.98bn of assets.

McDermott says more funds which have £10m or fewer in assets under management appear on the list.

Among these were the Barclays Wealth Global Markets 1, 2, 4 and 5 and PFS Momentum Factor 2, 3 and 4 funds.

McDermott says: “Funds of this size are generally more expensive for investors as they are not large enough to enjoy economies of scale and these costs can weigh heavily on performance. For the fund management company, they are also not a viable proposition as they don’t generate enough income.

“Unless the fund management company believes they can gather new assets in a reasonably short period of time, they usually get wound-up or merged with other funds. Investors may want to pre-empt this move by taking action themselves.”

The SF Webb Capital Smaller Companies Growth fund again 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 78.38 per cent.