The likes of Vanguard, L&G and BlackRock remain among the biggest players in index-tracking, with the most comprehensive suites of funds in the UK.
Still, it is surprising how many other household retail names, who have spent years building up a reputation for beating benchmarks, offer up products which are structurally designed to underperform.
After all, that’s what a passive fund is, right? Index minus fees.
It’s not that I have a problem with passive funds, which lest we forget often represent an investor’s best course of action in efficient markets.
However, as Chelsea Financial Services’ latest RedZone report makes clear, certain groups have not been investing in enhancing their standing in the tracker space.
The RedZone (the worst-performing funds over the past three discrete years, with third or fourth quartile returns each year) lists 143 funds with total assets in excess of £48.5bn.
More than half of these assets (£26.8bn) are in funds listed within the IA UK All Companies, most of which (£19.8bn) are in passive funds.
Among the culprits to have underperformed the sector average over three years are passive offerings fielded by the likes of M&G and F&C.
Others include Henderson UK Tracker and UK Index and Liontrust FTSE 100 Tracker, all of which are actually managed by State Street Global Advisers, and Old Mutual’s UK Index fund run by BlackRock.
Some of these funds have actually underperformed their respective indices, either the FTSE 100 or FTSE All-Share, by up to 4% not marginal figures acceptable for tracker funds.
Maybe some of these big retail names should be rethinking their relationships with outsourced managers before it begins to impact their brand’s reputation in what is easily the most competitive funds marketplace in Europe.
