£33bn of investors' money sitting in failing funds

Almost a third of these assets, £10.79bn, are sitting in Scottish Widows funds, while Legal & General fund managers are looking after £3.7bn and State Street funds are managing £2.1bn.

Chelsea Financial Services has compiled a ‘Red Zone’ list of 115 funds that have consistently appeared in the 3rd and 4th quartile for three years or more (1 September 2010 to 1 September 2013), excluding funds where the manager has changed in the past 18 months or if there has been a specific change in the fund’s focus.

UK All Companies is the sector with the highest number of funds on the list, with 22 underperforming funds, more than half of which are trackers or enhanced index products.

And some of the best known managers in the country are included, which may come as a surprise to some investors. Neil Woodford’s SJP UK High Income fund has underperformed as it has less investment flexibility than his more well-known Invesco Perpetual branded income funds, and also comes with a higher charge.

Also included is Jupiter’s Merlin Worldwide Portfolio, run by John Chatfield-Roberts. Chelsea puts it down to its heavy exposure to the long-term structural growth opportunities in emerging markets.

The worst performing fund on the list over the three year period was Manek Growth, which has been appearing in the bottom 10 for a number of years. Darius McDermott, Managing Director at Chelsea, said: “Thankfully there are 'only' £20 million worth of assets remaining in this fund because it has returned 83 per cent less than the sector average over the three years.”

Note: *Over three years from 1 September 2010 to 1 September 2013.

Source: Chelsea Financial Services