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All 29 funds run by banks fail to shine, our list shows


Every investment fund run by a high street bank is producing lacklustre returns, research shows.

None of the 29 funds managed by companies such as Barclays, HSBC and Santander ranks in the top fifth for growth when compared with similar investments.

Bank funds hold an enormous £25bn of savers’ money – most of it invested under instruction by branch staff. Although many of the funds are no longer sold over the counter, vast numbers of customers still pay regular premiums under the impression that the funds are appropriate.

The damning study, by analyst, suggests such loyalty is misplaced.

Brian Dennehy, director of the firm, said: “High street banks have become complacent and are benefiting from customer inertia. Because investors have billions of pounds in these funds, there is little incentive for banks to recommend that customers switch to a better performer. Anyone who has one of these investments must take the initiative.”

Mr Dennehy tracked the growth of the 29 bank-run funds over the past five years.

The majority languished at the bottom end of the league table for funds that invested in similar areas or sectors of the economy. None managed to get into the top fifth of performers for funds of its type over the five-year period.

Barclays, HSBC, Halifax and Santander were highlighted as particularly poor fund managers.

Of the funds invested in British shares, the worst over the five years was Santander UK Growth. It returned 63pc – turning each £10,000 into £16,300 – against an average of 85pc for funds of its type. In contrast, the best-performing fund, MFM Slater Growth, has risen by 233pc, turning £10,000 into £33,300.

Other bank funds highlighted as perennial underachievers included Halifax UK Growth and HSBC UK Growth & Income.

The majority of other bank-run funds were “funds of funds” – in other words, funds that bought other funds. This made the funds more expensive because there were two layers of charges.

Again, when pitted against similar funds, the majority of bank funds failed to match up.

Mr Dennehy put warnings on several “mixed-asset” funds, which contain shares, bonds and other investments. He named Royal Bank of Scotland Cautious Growth, Barclays Cautious Portfolio and HSBC Open Global Return as underperformers. Each had 20pc to 60pc of its money in shares.

The results were similar for funds that held slightly more money in shares. Of those holding between 40pc and 85pc, Mr Dennehy warned against Santander Max 70pc Shares, Barclays Growth Portfolio and HSBC Balanced.

Most banks have stopped selling investments to customers in high street branches. Wealthier savers with more than £50,000 or £100,000 at the bank can in some cases still access financial advice. The withdrawal of bank financial advice was the result of tighter regulation of the way investment charges were levied and a series of mis-selling scandals.

However, bank funds are still open for new investment. Savers can access them directly, if they ask, or through a so-called “fund supermarket” such as Bestinvest, Chelsea Financial Services or Hargreaves Lansdown.

Darius McDermott of Chelsea said high charges and lack of management expertise meant these investments rarely kept pace with funds run by specialist firms such as M & G, Jupiter and Invesco Perpetual.

“Banks have millions of clients on their books, so it’s not surprising some of these funds are still huge,” he said.

“But investment management tends to be a small part of the business – banks do not put in the same level of resource as a fund management company.”

Source: Telegraph

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