Some of the UK’s “very talented and experienced” managers have found themselves on the Chelsea RedZone list of consistently underperforming funds.
The latest edition of the tri-annual RedZone report, which highlights funds that have suffered third or fourth quartile returns during the past three consecutive years, features appearances by Neil Woodford’s £1.6bn SJP UK High Income fund and the £811.6m Jupiter Merlin Worldwide Portfolio, run by John Chatfeild-Roberts and his team.
The report says: “[SJP UK High Income] has less investment flexibility than Woodford’s more well-known Invesco Perpetual branded funds … and higher charges won’t have helped.”
SJP chief investment officer Chris Ralph points out there are times when SJP UK High Income outperforms Woodford’s Invesco Perpetual High Income fund and says its different mandate was devised to help drive long-term returns. Meanwhile, he notes the higher cost of the fund includes financial advice for the client.
Looking at Jupiter Merlin Worldwide, Chelsea notes that manager selection in the fund of funds has been “relatively good” but says its heavy exposure to emerging markets has hampered performance during the last three years.
Jupiter says: “It can sometimes be the case that themes we have exposure to in the portfolios have not yet played out in markets and we believe this to be the case with regards to our recent performance.”
The number of funds on the RedZone has fallen to 115 with assets totalling £33bn – down from 146 funds with combined assets under management of more than £34bn in June.
Scottish Widows and Legal & General were the worst offenders with seven funds apiece on the list. Scottish Widows manages £10.79bn in RedZone assets, or almost a third of the total, while Legal & General oversees £3.7bn.