Fund managers are 'clueless'

Fund managers are 'clueless'

Investors have gambled on active funds and mainly lost

"Clueless" stock market fund management firms are losing investors a fortune, the Virgin group says.

Virgin claims that firms which employ highly paid managers to pick potential growth shares have failed miserably, with six out of 10 failing to beat the FTSE All Share index last year.

As a result, Virgin says that the high fees charged by stock picking, active fund managers are wasted and investors would be better off putting their money into funds which simply buy equal portions of the market in effect tracking the FTSE All Share.

However, in a falling market tracker funds have also lost investors millions of pounds.

Active premium

Fund managers have only beaten the stock market once in the last 15 years, proving that they are getting worse year on year.

Gordon Maw

Since the beginning of 2000, the UK FTSE All Share has lost nearly half its value.

Traditionally, stock market funds which can pick and chose shares as opposed to those that track the market have been seen as the best bet.

Actively managed funds though come at a premium - initial charges can be as high as 5%, and annual management fees of 1-1.5% are commonplace.

But new research from Virgin Money - which manages a tracker fund worth £2bn - shows that during the last 10 years 80% of actively managed funds have underperformed the FTSE All Share.

Gordon Maw, a director of Virgin Money, said: "Fund managers have always marketed themselves as the better option when the markets go down.

"Our research shows no evidence of this and actually shows that fund managers have only beaten the stock market once in the last 15 years, proving that they are getting worse year on year."

One way ticket

But tracker funds have been branded "a one way ticket" down in a falling market by a leading financial adviser.

Virgin's tracker for example may not have fallen as far as some active funds but has still lost some investors a fortune in line with the market.

Ben Yearsley of Hargreaves Landsdown predicted that the stock market would not return to steady growth for at least three years.

"Under these circumstances, a tracker is the wrong place to have your money.

"At least with an active fund manager you have a chance of moving sideways or upwards.

It is worth paying a little extra for an active fund manager."