Asset Intelligence reveals GBP22bn of assets languishing in 'serial underperformers'

More than GBP22 billion is currently languishing in multi-asset funds which have underperformed their peers consistently over the last decade, new research from Asset Intelligence has found.

Analysing consistent long-term underperformance – defined by third or fourth quartile performance over three, five and 10 years — Asset Intelligence has found that funds with GBP22.1 billion of assets are serial underperformers.

In total, over 14 per cent of the GBP155 billion invested across the three IA Mixed Investment sectors (0-35 per cent, 20-60 per cent and 40-85 per cent shares categories) have been consistently third or fourth quartile over the three time periods.

The research also found that, from 2013 to 2020, GBP30.2 billion languished in third or fourth quartile products over consecutive five-year rolling periods, accounting for a fifth of all multi-asset funds.

While funds often have specific objectives and may therefore lag the sector average for various reasons, the figures nonetheless demonstrate that a large number of assets have simply been left to underperform over the long-term.

Robert Love, head of research & principal at Asset Intelligence, says: “Multi-asset funds are one of the most widely-used solutions for advised clients, but our research shows a huge amount of money has been left to underperform for much of the last decade.

“Designed to act as one-stop-shop investments that offer diversification, multi-asset funds were meant to offer the best of both worlds by allowing participation in equity markets but without the same level of volatility (and ultimately risk).

“Some funds have done this – capturing much of the upside when markets rise and providing a good degree of protection when markets fall. However, many have not, consistently lagging their peers.”

Asset Intelligence says the level of assets sitting seemingly untouched in these serial underperformers is a major concern.

“Too many multi-asset funds have failed over the long-term, and while we understand that not all funds can be compared on a like-for-like basis, the fact so much money has been allowed to stagnate at the bottom of the pile is frankly unacceptable.

“Investors deserve better outcomes from these types of investments.”