The Neptune Global Special Situations fund managed by Robin Geffen remains a red flag fund for the fourth year running.
Mr Seager-Scott asserts: “Although the high-conviction, focused style has many fans and the fund has been aggressive with its geographical allocation, the calls simply haven’t paid off and it has underperformed in four of the last five years – surely a clear candidate for the chop.”
| Red flag funds in numbers |
3 - Number of red flag funds in the IA North America sector 5 - Number of red flag funds in the IA UK All Companies sector 6 - Number of red flag funds that appear for four consecutive years 11 - Number of funds that appear on the list for the first time 23 - Number of red flag funds this year 132 - The number of funds launched in 2015 |
Also in the red flag list for the fourth consecutive year is the ConBrio UK Smaller Companies fund. Manager Alistair Currie says performance has improved over the past year but the five-year figures are still being adversely impacted by its significant weighting to AIM-listed companies and very little exposure to mid-caps, unlike some of its peers in the IA UK Smaller Companies sector. The manager also points to the recent decision to invest in employee-owned businesses, which he believes has contributed positively to performance.
Adrian Lowcock, head of investing at Axa Wealth, remarks: “Fund groups need to strongly consider the impact of having smaller funds in their suite of funds as a name appearing on a list such as this could damage the brand.”
| Expert view |
Adrian Lowcock, head of investing at Axa Wealth, comments: “On the whole, I think funds struggle once they sink below £50m and become very difficult to manage under £20m. At this point, fund managers should strongly consider whether it is in the investors’ interest to close these funds or to keep running them. Costs are one of the biggest factors when managing a fund and it becomes a hurdle the managers need to get over before they can add value. This becomes very significant in tracker funds where costs are a key drag on performance. Once a tracker fund becomes red flagged, it is hard to see how it will reverse that trend. “The other consideration is the riskiness of the market or volatility. If the fund is small and investing in risky areas it could quickly get smaller, compounding the issue of size. Any fund manager running a fund of small size is hardly going to be motivated to deliver performance – arguably if they did they would be handed larger fund mandates to run.” |
The VT Smart Dividend UK fund appears again on the red flag fund list, although ownership of the fund moved last year from Maven Capital Partners to Valu-Trac Investment Management. Robert Davies, adviser on the fund, acknowledges its fourth-quartile performance but points out under new ownership it will be renamed the Munro Smart Beta fund, subject to FCA approval, to better reflect its strategy.
