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Mixed funds are half of RedZone

Nearly half of the 10 worst- performing funds in the latest Chelsea Financial Services RedZone survey are in the mixed investment 20-60 per cent shares sector.

The survey, which analyses funds across the IMA sectors, shows that four of the 10 funds that have underperformed on a cumulative basis over three years to January 1, are in the mixed investment 20-60 per cent shares sector, previously the cautious managed sector.

These include the £11m Barmac The Castleston growth, £13m F&C blue, £1.2m Neptune cautious managed and £21.3m Insight diversified high-income funds.

Twelve of the 163 funds in the mixed investment 20-60 per cent shares sector have underperformed the sector average of 23 per cent.

Chelsea Financial Services managing director Darius McDermott says: “The fact that a sector of funds deemed to be of limited risk can underperform by such a huge amount is simply unacceptable.

“Even more troubling is the fact that this sector has been one of the most popular among investors over the last few years, suggesting a large number of people could be holding dud funds in their portfolios.”

Lift Financial joint chief executive Joel Adams says: “In 2008 and 2009, market turbulence meant investors looked to the cautious managed sector and that trend has continued since. It appears to investors to be a better solution than an active managed solution.

“But asset allocation in a portfolio is the biggest driver of returns, so I am not in favour of using managed funds. As investors cannot have a fund tailored, they have to rely on the manager to make the call on asset allocation.”


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