Scottish unit trusts feature among worst performers

Investors have more than £18 billion tied up in unit trusts that consistently fail to produce the goods, with Scottish providers among the worst culprits.

The latest Relegation Zone report from broker Chelsea Financial shows that 86 funds with assets under management of 18.4bn have underperformed their benchmark each year for three consecutive years.

The amount of money in the funds has increased by 5.2bn in the past six months, due partly but not entirely to the impact of the recent bull run on asset values. Edinburgh-based Scottish Widows and Scottish Widows Investment Partnership (Swip) account for eight of the 86 funds in the zone and 21 per cent of the report's total assets under management.

Standard Life Investments has three funds in the zone, while Scotland-based groups including Ignis, Aberdeen, Martin Currie and Baillie Gifford also feature.

Swip's appearance in the list comes just days after Peter Cockburn, its head of UK equities, admitted that the firm had been slow to address performance issues. Cockburn, who took on the role last summer, said: "We have done things that arguably should have been done earlier. But it's not a great consolation for people who have suffered as a result of that underperformance."

The worst relative performance was from the UBS Absolute Return Bond fund. Investors have seen the fund lose 28.8 per cent of its value over the past three years, despite the fund's aim of producing gains regardless of market conditions. Darius McDermott, the managing director of Chelsea Financial Services, said: "A persistent trend in the relegation zone over the years has been the presence of bank and life company investment funds.

"They, typically, are very large perennial underperformers that still manage to take in money.

"Keep an eye firmly on the factsheets of these funds to see if you are receiving true active management in return for your annual management charge."