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Critics hit out at low active share in banks’ and insurers’ funds

Critics have hit out at banks and insurers’ funds as new data stokes fears over value and investment performance.

The FCA voiced concerns throughout its recent asset management market study that “partially active” funds were varying little from their indexes but levying higher fees than passives.

Morningstar calculations have singled out investments sold by Halifax and Scottish Widows as those with holdings nearest to their index, in a project run with the Financial Times.

Halifax and Scottish Widows own some of the largest UK equity funds, with up to £5bn of assets in some.

Morningstar calculated the active share in Halifax’s UK Growth and Scottish Widows UK Growth was 25. The Halifax UK Equity Income fund scored 46 for active share, but this was still lower than the 60 often cited as a benchmark.

All three funds charge 5 per cent initial fees and ongoing fees of up to 1.38 per cent.

Financial planners told the FT that there had been less pressure on fees because the funds had often been sold through banks’ branch networks and not IFAs.

Tilney managing director Jason Hollands told the paper: “The inflows will have come through legacy sales channels and captive distribution at banks and life assurers.

“This has proven to be sticky money over the years, largely as a result of investor inertia. Sadly I suspect many investors in these funds will be impervious to improved disclosures on costs or performance reporting against benchmarks.”


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