Andy Brough’s £1.4bn fund is arguably the highest profile on the list, but there were plenty of big names present, including the likes of Standard Life TM UK Equity General and Newton UK Equity.
Giant underperforming UK All Companies funds
| Name | 3yr (%) | 5yr (%) | 10yr (%) | AUM (£bn) |
|---|---|---|---|---|
| FTSE 250 Index (ex IT) | 66.75 | 73.57 | 314.35 | N/A |
| Schroder UK Mid 250 | 64.62 | 47.45 | 231.96 | 1.38 |
| FTSE All Share | 44.07 | 35.22 | 149.58 | N/A |
| Newton UK Equity | 36.32 | 28.28 | 144.47 | 1.16 |
| Threadneedle - UK Institutional | 43.84 | 33.59 | 138.46 | 1.08 |
| CIS UK Growth | 40.3 | 26.88 | 124.25 | 1.14 |
| Santander UK Growth | 37.05 | 27.99 | 119.83 | 1.24 |
| Halifax UK Growth | 36.9 | 24.77 | 103 | 5.85 |
| IMA UK All Companies | 44.93 | 33.85 | 138.49 | N/A |
| Standard Life TM UK Equity General | 40.01 | 23.67 | 136.29 | 1.13 |
| Scot Wid UK Growth | 33.39 | 17.39 | 91.13 | 2.93 |
Source: FE Analytics
All but the Schroders and Newton funds have also fallen short of their IMA UK All Companies sector average over the three periods.
Given that Schroder UK Mid 250 focuses on companies in the FTSE 250, it would be misleading to compare its performance to the sector, however.
The eight portfolios have combined assets under management (AUM) worth almost £16bn. The largest is the £5.8bn Halifax UK Growth fund, which also happens to be one of the worst performers on the list overall.
Our data shows that it has not only fallen short of its benchmark over three, five and 10 years, but it also consistently dwells in the bottom quartile of its IMA UK All Companies sector.
The only fund that has done significantly worse is the £2.9bn Scottish Widows UK Growth fund, which is a bottom-decile performer in its sector over five and 10 years.
It has underperformed its IMA UK All Companies sector average, which is also its benchmark, by more than 10 percentage points over a three-year period, more than 15 percentage points over a five-year period, and almost 50 percentage points over the last decade.
A spokesperson for SWIP said the firm accepts that performance should be better, but that it is looking in to ways to improve its process.
"We take underperformance in any of our funds seriously," they said. "We recently repositioned our equities strategy and are beginning to see the benefits of this move in these funds."
Scottish Widows UK Growth has been team managed by the Quantitative Investment Group since September 2012. Prior to this, it had seven managers in the space of just a decade.
In a recent interview with FE Trustnet, Bestinvest’s Jason Hollands pointed out that SWIP has made a lot of changes to its range of equity funds recently, but that this follows a long line of revamps in the last decade or so.
The Halifax fund is also run by Scottish Widows.
Performance of funds vs sector and index over 10yrs
Source: FE Analytics
The Schroder UK Mid 250 fund is a former darling of the sector, and still a staple for those looking for exposure to the mid cap market.
It was at one point one of the largest UK growth funds during the 2000s, but underperformance and significant outflows have seen AUM fall to £1.39bn.
Brough, who is an FE Alpha Manager thanks to the overall performance of all of the funds and trusts that he runs, had a particularly poor period between 2007 and 2011.
Our data shows Schroder UK Mid 250 fell significantly short of its FTSE 250 (ex IT) benchmark in every calendar year over the period.
Year-on-year performance of fund vs index 2007 to 2013
| Name | 2013 (%) | 2012 (%) | 2011 (%) | 2010 (%) | 2009 (%) | 2008 (%) | 2007 (%) |
|---|---|---|---|---|---|---|---|
| FTSE 250 (ex IT) | 17.21 | 28.71 | -10.3 | 28.41 | 52.79 | -38.42 | -3.69 |
| Schroder UK Mid 250 | 20.16 | 35.83 | -14.91 | 22.03 | 39.04 | -41.28 | -7.78 |
Source: FE Analytics
Brough has steadied the ship more recently, however, and the fund is ahead of the index over a one-year period as a result, and year-to-date.
FE Trustnet will speak exclusively to Brough (pictured) later on today about how he has turned around performance. Both the £1.16bn Newton UK Equity fund and £1.08bn Threadneedle UK Institutional fund only fell short of their benchmarks by a matter of percentage points over the periods.
Both have seen a change of management at the top in the last three years, with Richard Wilmot taking over the Newton fund in 2011, and Simon Brazier taking charge of the Threadneedle fund in the same year.
A spokesperson for Threadneedle points out that performance has improved since Brazier has taken over, and says the vast majority of assets invested in the fund belong to institutions, which prioritise long-term absolute performance.
Newton acknowledges that the UK Equity fund has still underperformed under Wilmot since his appointment, but is encouraged that the changes he has made have resulted in an improvement.
"Since taking over as lead manager, performance has improved relative to the sector average. From March 2011 to June 2013 the fund posted a return of 24.62 per cent against a sector average of 27.14 per cent."
"In contrast, the two years prior to Wilmot’s leadership saw the fund return 30.35 per cent compared with a sector average of 63.68 per cent."
"Wilmot’s cumulative performance record to date is strong across the range of funds he currently manages and has previously managed and we expect to see performance continue to improve," the spokesperson finished.
Karen Robertson’s £1.13bn Standard Life TM UK Equity General fund has a particularly poor record over five years, falling short of the All Share by around 10 percentage points.
A spokesperson for the group says a dire 2011 has been the prime contributor to underperformance, but believes the fund’s bottom-up approach is better suited to the current market outlook.
"Historic performance has been robust, but the macro-driven markets of 2011, where stock correlations spiked, impacted longer-term returns," the spokesperson said.
"Our proven bottom-up investment process focuses on company fundamentals. While there may be periods where company fundamentals are not recognised in the short-term, we firmly believe they are the key driver of share prices over the longer-term."
"Prior to 2011, the fund was ranked in the second quartile over five and 10 years."
Performance of fund vs index over 10yrs
Source: FE Analytics
Robertson has run the Standard Life fund since 2000. The group points out that pension money dominates AUM, and that it does not actively market the fund to retail clients.
The last two funds to complete the list of eight are predominantly made up of life and pensions money – CIS UK Growth and Santander UK Growth.
Andrew Moffat has run the £1.15bn CIS fund since February 2011, while Richard Moore has run the £1.26bn Santander fund since July 2007.
Both funds have fallen short of their benchmark and are third quartile in their sector over five and 10 years. The Santander fund has a worse record over one and three years though, pushing it in to the bottom quartile.
Hargreaves Lansdown’s Laith Khalal points out that funds full of pension money often tend to underperform, but their strict risk-profile means that managers find it difficult to stray too far from their benchmark.
"By and large, the whole pension sector is performing in the same way, drifting not too far from the median," he said.
"They are average, but the point is that they were built to be average. This is because they’re low cost, which employers tend to like, and by being average it means they never radically underperform."
Another giant underperforming UK growth portfolio worth a mention is the £1.2bn SWIP MultiManager UK Equity Focus fund, which has underperformed its All Share benchmark over one, three and five years.
It is in the bottom quartile over all three of these time periods, but because it was only launched in 2004 it cannot be judged over a 10-year period.
