Merrill Lynch fund manager Richard Plackett has told IFAs to steer clear of 80 per cent of smaller companies funds after branding their performance unacceptable.
UK smaller companies chief Plackett says only 12 of the 62 funds in his sector have an acceptable performance level.
He believes that advisers should not put up with investment performance that fails to beat the performance of cash. His own fund has returned 60 per cent over the last five years.
Plackett, whose £67.5m fund is currently ranked sixth in the index, believes that all the funds which are performing well have done so because of solid research and in-depth company meetings.
He believes funds have to make absolute returns and that managers need to detach themselves so that they do not fall in love with stocks that have performed well.
Plackett says: “Any fund that does not beat cash should be unacceptable to IFAs. They need to ask themselves why they are investing in that fund and take their money away. It is not acceptable in any sector but particularly not in small or mid caps.