Red flag funds: The 40 at risk of closure

Elsewhere, the SVM Global Opportunities fund is currently under review at the time of writing due to its consistent underperformance. Swip also notes that the future and strategy of the £7.2m Swip Absolute Return Macro fund is “under review”.

James Aber, a spokesman for MFS Investment Management, who is on the list with the £5.5m MFS Meridian Japan Equity, notes: “With our focus on high-quality stocks, this fund has tended to outperform in challenging market environments and lag during strong equity rallies. Since late 2012, the Japanese equity market experienced a strong rally largely driven by monetary stimulus and a depreciation of the Japanese yen. We believe the portfolio remains well positioned to add value over the long term.”

The UBS UK Equity Income fund was identified as a red flag for the first time this year but UBS Global Asset Management has been quick to rectify any underperformance. It confirmed that Steven Magill took over as manager on April 29 2013, with the fund outperforming its FTSE All-Share benchmark index by 4 per cent, to May 31 2014, according to UBS.

The question is whether in this current period of low volatility across markets, funds that are already struggling to find returns can actually outperform.

Ellie Duncan is deputy features editor at Investment Adviser

RED FLAG FUNDS

METHODOLOGY

Investment Adviser sought to identify ‘red flag funds’ – those vehicles that could face imminent pressure to be closed or merged with a sister fund – across the IMA sectors using data from FE Analytics and the following metric:

– The fund must have been launched in 2008 or earlier (and therefore have been through a full business cycle)

– It must currently have less than £10m in assets under management

– It must have ranked in the third or fourth quartile of its peer group in terms of its performance in a five-year period

RED FLAG FUNDS: The 32 that made the list in 2013 and 2014