Royal Bank of Scotland has closed its much-hyped balanced and cautious volatility funds less than two years after launching the offerings.
The £50m Balanced Controlled Volatility fund and the £49m Cautious Controlled Volatility fund were both launched in January 2011 with RBS claiming the funds will offer levels of volatility that the cautious and balanced labels might ordinarily imply to investors.
The Cautious Controlled Volatility fund is currently the third worst performing fund in the Investment Management Association Mixed Investment 40-85% shares sector in the past 12 months, having fallen 1.4 per cent in value compared to an average return of 11.1 per cent for the sector. Since launch, the fund fallen over 10 per cent, while the sector has returned an average of 5.05 per cent.
The Balanced Controlled Volatility fund sits in the Specialist sector and has returned 6.1 per cent in the past 12 months, this compares to a sector average of 11.1 per cent. Since launch the fund has fallen 8 per cent compared to an average return of 0.26 per cent in the Specialist sector.
At the time of the launch, research by RBS found that IFAs refuse to recommend 33 per cent of balanced managed funds and 28 per cent of balanced funds as they consider them “too risky”.
The bank also said many rival cautious and balanced funds were much more volatile. It said research showed the 10 largest funds in the IMA Cautious Managed sector – which has since been rebranded IMA Mixed Investments 40-85% shares – saw volatility rise significantly during difficult market conditions in 2001 and 2008/9. Volatility reached 25 per cent for some funds in the Balanced Managed sector in 2008.
RBS was unavailable for comment.