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Mushrooming Euro funds pose problems for investors

Seven Investment Management director Justin Urquhart Stewart claims that the proliferation of small European investment funds could damage returns for investors.

He says the number of funds in Europe has risen by 32 per cent since 2002 to 32,941 funds. This is four times the number as in the US where funds are on a larger scale, enabling costs to be spread.

Urquhart Stewart says: “The growth in the number of funds over the past few years has been positively fungal. It should come as no surprise that quite a few are now vanishing with the speed of an anti-fungal spray. Mind you, some of them were about as useful as a bout of athlete’s foot and deserved to be extinguished.”

He warns investors against being “shoehorned into a convenient larger fund simply to reduce that fund manager’s costs and headcount” as he expects smaller funds to close or merge.

But Ascentric head of sales Shaun Sandiford adds: “Top funds often lose their sparkle when they get too big. Just as small companies are the engine room of the economy so too are small funds, especially when we see the green shoots of recovery.”

Arch Financial Planning managing director Arthur Childs notes: “It is nice to have a wide range of funds but we cannot look at or research all of those.”

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