Moneyspider in the News

Why big isn't beautiful

The Sunday Times

IT HASN'T been a great Isa season for the big fund managers. They did as they usually do in the first three months of the year: they rushed to offer tempting discounts on their up front fees and put up ads everywhere they can find an empty bit of wall to alternately beg and bully us into buying their funds. But so far the evidence suggests it hasn't done them much good.

The numbers for January and February were awful, with less than half the amount of cash flowing into equity Isas as last year. While the numbers for March aren't out yet, it looks like they will be just as bad. So what's going on? We keep hearing that the savings ratio in the UK is on the up, so why isn't that being reflected in the Isa numbers?

I suspect it is the rising cost of living: if you think your mortgage payments, utility bills, council taxes and grocery bills are likely to keep rising (as they are) you are keen to increase the amount you have in your emergency deposit account, but perhaps not so keen to lock more money than you have to in long term saving vehicles.

However, it may also have some thing to do with a higher level of disillusionment than usual when it comes to the performance of Isa funds.

Despite the fact that there are thousands of options, most of the money invested tends to go to big funds run by the heavily branded management companies and high-street banks. These often disappoint: I've been looking at the fund rankings from Moneyspider.com for 2006 and the results don't make happy reading for some of the biggest names in the business.

Moneyspider's system ranks 2000 UK funds from A (very good) to E (distinctly poor), with the grades taking into account each fund's performance against its sector, all other funds, the FTSE 100 and cash over one, three and five years. It also ranks fund- management groups as a whole. Fidelity ended 2006 41st out of the 54 groups monitored, and the big high-street names - HSBC, Abbey, Halifax and NatWest - came out even worse. Halifax was ranked 52nd and Abbey 53rd.

If you bought a fund for your Isa through any of them last year, just because you trusted in the power of their brands, should it be any wonder to the financial-services industry that this year you fancy a nice safe savings account instead?

Now to the best performers in the league table. These are mainly boutique firms with fewer than 20 funds under management - the likes of Rathbone, St. James's Place and Neptune.