The list includes high-profile funds such as Jupiter Income, Fidelity Global Special Situations and Newton Higher Income.
Performance of funds vs sectors over 10-yrs
| Fund | 3yrs (%) | 5yrs (%) | 10yrs (%) |
|---|---|---|---|
| IMA UK Equity Income | 28.21 | 23.16 | 127.74 |
| Newton Higher Income | 18.53 | 16.83 | 126.16 |
| Jupiter Income | 18.45 | 8.64 | 120.44 |
| Halifax UK Equity Income | 13.68 | 14.67 | 73.02 |
| IMA UK All Companies | 26.6 | 24.8 | 129.5 |
| Halifax UK Growth | 19.66 | 17.02 | 95.97 |
| Santander UK Growth | 19.32 | 22.24 | 108.57 |
| Scottish Widows UK Growth | 13.16 | 8.11 | 86.12 |
| IMA Global | 17.88 | 17.33 | 104.92 |
| Newton Global Equity | 16.95 | 15.68 | 125.57 |
| Fidelity Global Special Situations | 9.28 | -2.31 | N/A |
| IMA Sterling Corporate Bond | 24.3 | 30.94 | 54.93 |
| Halifax - Corporate Bond | 19.09 | 18.04 | N/A |
| IMA Sterling High Yield | 27.37 | 45.48 | 107.8 |
| L&G - High Income | 22.31 | 28.46 | 82.99 |
Source: FE Analytics
Seven of the 10 funds have also underperformed over a 10-year period. While some have experienced manager changes in the last three years, many have stuck by the same person throughout the duration of this underperformance.
The £1.9bn Jupiter Income fund is one of the portfolios that has seen a management change recently, with Ben Whitmore taking over from industry stalwart Anthony Nutt.
The fund has returned just 18.45 per cent over three years and 8.64 per cent over five – which means it has fallen well short of its IMA UK Equity Income sector and the FTSE All Share over both periods.
A spokesperson from Jupiter said that the fund’s underperformance had been disappointing, but pointed out that the portfolio actually beat its benchmark and the sector over the whole length of Nutt’s tenure.
Performance of fund vs sector and benchmark
Source: FE Analytics
The £2.2bn Newton Higher Income fund has underperformed against the FTSE All Share and IMA UK Equity Income sector over three, five and 10 years.
Newton installed a new management team for the fund in October last year, with Richard Wilmot and Paul Stephany replacing Tineke Frikkee, who had managed it since April 2004.
The fund returned 69.84 per cent under Frikkee, underperforming the All Share by almost 20 percentage points over the period.
Wilmot says that he and Stephany are seeking to change the fund’s investment style.
"The environment for investing in higher-yielding stocks in the UK equity market has become more challenging in recent years, with a decreasing number of attractive higher-yielding equities available to investors," he explained.
"We have concluded that the dividend yield of the Newton Higher Income fund is unsustainably high. We intend to reduce the fund’s yield and also broaden the buy-and-sell discipline of the fund."
Another Newton fund on the list is Newton Global Equity. It too has had a recent management change, with Jeff Munroe replacing Jonathan Bell in January 2012.
Munroe says that 2012 was a good year for the fund, but realises there is still plenty of work to do.
"Over the year we have instituted changes to the process we use for building global equity portfolios and have made a number of changes to the holdings in our portfolios," he said.
"2012 was a better year for investment performance and we have more to do in the years ahead."
According to FE Analytics, the fund has beaten the sector and the MSCI AC World index over one year.
The £1.3bn Fidelity Global Special Situations fund, like Newton Global Equity, is a constituent member of the IMA Global sector and has failed to outperform its benchmark, the MSCI AC World index.
Jeremy Podger, who has previously run funds at Threadneedle and Investec, was appointed manager of the fund in March of last year – replacing Jorma Korhonen and FE Alpha Manager Sudipto Banerji.
A spokesperson from Fidelity attributed the recent poor performance to losses in the wake of the 2008 crash and a particularly challenging 2011.
Podger says that one of his first priorities when he took over the fund was reducing its high volatility.
"I have increased the average market capitalisation of the portfolio for added stability during periods of volatility," he commented.
"Beta in the portfolio has also fallen, although I don’t explicitly target Beta; it has happened because I have tried to remove volatility at a stock level. The upshot is that the portfolio is a little less sensitive to market movements, which reduces portfolio risk," he added.
In the IMA UK All Companies sector, Halifax UK Growth, Santander UK Growth and Scottish Widows UK Growth are three giant funds that have consistently – and significantly – underperformed against their sector and All Share benchmark.
All three have fallen short over three, five and 10 years.
Performance of funds vs sector and index over 10yrs
Source: FE Analytics
The three funds have combined assets under management (AUM) of more than £6.3bn.
Halifax’s UK Equity Income and Corporate Bond funds have also underperformed against their benchmark and sector, making it the most represented asset management firm in the group of 10.
A spokesperson from SWIP – the parent company of Halifax – says the firm is planning to make a number of changes to their underperforming portfolios.
"In April of this year, we announced that, in response to changing client needs, we would reposition our £54bn equities business to focus on global and specialist active equities, in addition to quantitative equities."
"This means that we are in the process of transitioning a number of our equities funds, including the Scottish Widows UK Growth and the Halifax UK Equity Income, to a new equities strategy."
The £1.4bn L&G High Income fund is the only multi-billion pound portfolio that has underperformed its IMA Sterling High Yield sector over three and five years. Unlike the majority of the funds in the list, its manager – David North – has been in charge for the whole of the last 10 years.
Reeves says that the fund's recent underperformance against its benchmark can be attributed to a high weighting to more volatile areas of the market when sentiment turned to 'risk off' in 2011.
"The High Income fund did underperform its benchmark in the second half of 2011, which is reflected in the fund's longer-term track record," he explained.
"The fund did extremely well relative to its benchmark in 2009 and 2010. This was largely attributable to overweight positions in Europe and emerging markets, which, as markets turned more volatile towards the end of 2011 and investor risk-aversion increased, were the assets which fell most sharply in price."
Santander was unavailable for comment.