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Chelsea RedZone assets grow 62% to £34bn

Investors have over £34bn in underperforming funds, up 62 per cent from £21bn in February, according to Chelsea Financial Services.

The firm’s triannual RedZone report, published this week, shows 146 funds with combined assets under administration of more than £34bn have suffered third or fourth quartile returns during the past three consecutive years. In terms of AUM, this is a 62 per cent increase on the £21bn witnessed in February.

Chelsea’s DropZone, which looks at the 10 worst performers, has seen collective assets under management swell from £377m in February to just under £650m today – an increase of more than 72 per cent.

Jayesh Manek’s £21.9m Manek Growth fund tops the DropZone after underperforming the IMA UK All Companies sector’s average return by almost 53 per cent. According to FE Analytics, the fund is ranked fourth quartile over one, three and five years to 14 June.

Chelsea managing director Darius McDermott says: “This is a fund that, in our opinion, investors should not hold. It is continually a member of RedZone and people can do better than that.”

IMA UK All Companies is home to the largest number of duds appearing in the RedZone, with 26 funds from the sector being found on the list. Almost half of the underperforming IMA UK All Companies funds are trackers and hold 45 per cent of the assets in the RedZone.

Legal & General has the highest number of offenders with nine appearing on the list. JP Morgan contributes seven, while Scottish Widows and Fidelity take joint third place with five apiece.

However, Scottish Widows is the largest in terms of AUM – looking after £12.7bn, or more than a third of assets in the RedZone.

Equilibrium Asset Management investment manager Mike Deverell says: “When considering a fund, you should look at whether past poor performance was due to a period of very bad luck, examine how consistently the fund performs and whether it has decent alpha.”

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