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Daily Mail
06-06-2025
- Business
- Daily Mail
Income investors back cheap passive funds to save on fees - but are they missing out on returns?
Investors are increasingly shifting their holdings towards passive funds as low fees continue to drive inflows. Active UK fixed income funds across all sectors saw outflows of £15.87billion between January 2022 and the end of March 2025, while inflows into passive fixed income holdings saw inflows of £14.29billion, according to data from Rathbones. More recently, active fixed income funds saw outflows of £1.99billion in the first quarter of 2025, while passive funds again saw inflows of £878.33million. Choosing passive funds means investors will be saving money on their management fees, with passive fund fees generally significantly cheaper than active counterparts. However, it may also mean that they are sacrificing returns over the long term. Darius McDermott, managing director at Fundcalibre, said: 'Many "cautious" passive strategies ended up losing investors more than half their capital. 'Even when long-duration Government bond yields turned negative for a period of time, these strategies kept buying, simply because the index told them to. 'Everyone knew it was irrational. It shows why active is still very important.' Which passive funds are outperforming? Despite outflows, gross sales for active funds in the first quarter – that is, how much money they generated over the period – were £9.95billion, compared with £5.78billion for passive funds during the same period. Bryn Jones, head of fixed income at Rathbones Group, said: 'Assets under management in passive fixed income funds have held up despite there being significant underperformance in general and the significant difference in flows recently is really striking. He added: 'Too many clients are focusing on price when they select fixed income funds, with the result that they opt for underperformance while not fully understanding the option they are taking.' Rathbones says its Rathbone Ethical Bond Fund (ongoing charge: 0.66%) outperformed well-known passive funds in the IA Sterling Corporate Bonds sector by more than ten per cent over the past five years. Over the past ten years, the fund's growth was a third higher than bonds in popular passive funds. Even then, the Rathbones fixed income fund in question delivered a six per cent return over the past five years according to Trustnet data. Meanwhile, the M&G Short Dated Corporate Credit Bond fund (ongoing charge: 0.25%) returned 17.9 per cent, while the AXA Sterling Credit Short Duration Bond fund (ongoing charge: 0.408%) returned 13.9 per cent over the same period. Where does active pay off? McDermott says fixed income markets have had a rocky few years. He told This is Money: ' Inflation shocks, aggressive rate hikes and shifting central bank rhetoric have all made it a challenging environment for backward-looking passive bond strategies to keep up. 'In contrast, active managers have been able to adapt their positioning, taking advantage of opportunities and managing risk more effectively.' To benefit from an active approach, McDermott tips GAM Star Credit Opportunities (ongoing charge: 1.55%) and Liontrust Monthly Income Bond (ongoing charge: 1.03%) for their experienced managers. GAM, he says, 'leans into subordinated financial debt where yields are attractive, while Liontrust takes a macro-driven, defensive approach that has helped it protect capital during volatility.' McDermott also tips Nomura Global Dynamic Bond fund (ongoing charge: 0.7472%). He said: 'As a strategic bond fund, it has the freedom to move across the entire fixed income spectrum, and the manager has consistently delivered in terms of both income and capital return across different market conditions.' Leah Bramwell, investing expert at Canaccord Wealth, also tips two strategic bond funds, Jupiter Strategic Bond fund (ongoing charge 0.71076%) and Aegon Strategic Bond fund (ongoing charge 0.5844%). Bramwell said: 'In fixed income, active management can add significant value over passive options in some areas. 'By design, fixed income indices allocate higher weightings to the largest bond issues/issuers. Whilst this makes sense in the context of equities – investors are allocating to the companies with the largest market caps – it is less appealing when considering debt. 'In an ideal world, an investor would prefer to have higher exposure to companies with lower debt loads, as this should imply stronger balance sheets and less likelihood of default.' Bramwell tips Man GLG Sterling Corporate Bond (ongoing charge: 0.6185%), the manager of which she says 'employs a bottom-up approach with equity-like analysis on his positions. She adds: 'In all cases, investors should be clear on what risks they are taking around credit and duration, and how much they are being compensated for those risks through a higher return.' IA Sterling Corporate Bond fund performances Fund Name Yield (%) 1Y (%) 3Y (%) 5Y (%) M&G Short Dated Corporate Bond I GBP 4.54 6.5 16.1 17.9 AXA Sterling Credit Short Duration Bond Z Gr Acc 4.51 6 12.9 13.9 BlackRock Sterling Short Duration Credit D Acc 4.1 6.8 12.2 12.8 Fidelity Short Dated Corporate Bond W Acc 4.33 5.9 11.9 12.8 WS Canlife Short Duration Corporate Bond C Acc GBP 0 5.9 12.7 12.7 Royal London Inv Grade Short Dated Credit Z Inc 4.9 6.8 12.8 11.9 L&G Active Short Dated Sterling Corp Bond I Acc 4.2 5.9 10.7 11.7 abrdn Short Dated Corp Bond Institutional Acc 5.06 6.4 12.4 10.9 Schroder Sterling Corporate Bond Z Acc 5.72 6.7 7.3 10.9 iShares Corp Bond 0-5yr UCITS ETF GBP 0 5.9 11.8 10.9 CT Sterling Short Dated Corporate Bond Ini GBP 4.54 5.8 12.2 10.7 IFSL Church House Inv Grade Fixed Interest Inc 4.66 5.3 11 10.5 L&G Short Dated Sterling Corp Bond Index I Acc 4.5 6.2 11.8 10.4 Royal London Corporate Bond M Acc 5.18 6.7 10.8 9.9 Artemis Corporate Bond I Acc GBP 5.37 5.3 8.3 8 Royal London Sterling Credit M Acc 5.09 7 10.2 7.9 Vanguard UK Short-Term Inv Grade Bond Index Acc GBP 4.11 6.3 10.2 7.6 M&G Strategic Corporate Bond I Acc GBP 4.47 4.1 8.6 7.4 EdenTree Short Dated Bond B 3.24 5.1 9 7.1 abrdn Short Dated Sterling Corp Bond Tracker B Acc 4.53 5.9 9.4 6.9 Liontrust Sustainable Future Monthly Income Bond B Gr Inc 5.78 4.8 6.3 6.3 Rathbone Ethical Bond Fund I Acc GBP 5.1 5.3 8.6 6 SVS Sanlam Fixed Interest B Inc 4.43 7.1 9.4 5.5 BNY Mellon Global Credit W Hedged Acc GBP 3.39 6.2 11.1 5.5 Rathbone High Quality Bond Fund I Acc GBP 4.2 5.5 9.6 5.4 Premier Miton Corporate Bond Monthly Income C Inc GBP 5.2 6.3 9 5.3 Invesco Corporate Bond (UK) Z Acc 4.38 4.2 8.3 5.2 BlackRock Corporate Bond 1 to 10 Year D 4.54 6 8.9 5.1 Source: Trustnet Are equity investors also too keen on passive funds? The US has dominated global equity markets in recent years, with the S&P 500 delivering healthy returns in recent years. As a result, many retail investors have shifted their holdings towards cheaper passive funds from active alternatives. In 2024, passive funds recorded $1.4trillion of inflows, compared to $1.2trillion of inflows for active funds. Bramwell warns: 'It has been a challenging environment for active managers over the last decade. 'An increasingly concentrated US, and therefore global, equity market, combined with growing levels of passive ownership, have coincided with a sustained period of underperformance for active management. However, she added: 'Active investing shows its worth particularly in inefficient markets. These are markets that are perhaps less liquid, less deep, featuring less or little analyst coverage, or in economies exposed to pressures that distort the market – such as the chronic net outflows seen in the UK causing a mispricing of assets.' Bramwell tips Fidelity Special Situations fund (ongoing charge: 0.92%), SPARX Japan (ongoing charge: 1.03%) and Pacific North of South (ongoing charge: 0.83%). Bramwell also tipped Polar Capital Global Insurance (ongoing charge: 0.8366%) for its 'consistently strong performance, and said specialist infrastructure funds such as FTF Clearbridge Global Infrastructure (ongoing charge: 0.8187%), and Lazard Global Listed Infrastructure (ongoing charge: 0.91%), have 'protected well on the downside versus passive benchmarks.' 'For more efficient markets, like the large cap US space, the data shows a clear inability of active managers to 'earn their fee' and consistently outperform their benchmark indices,' Bramwell added.
BBC News
28-05-2025
- General
- BBC News
Wife begged husband 'don't let me die' after Wirral crash
A woman fatally injured by a careless driver begged her husband "please don't let me die" while laying injured in the wreckage of a crash, a court has heard. Christine Jones, 68, was a minute away from her home in Thornton Hough, Wirral when the vehicle she was a passenger in was struck by a Peugeot 3008 car driven by 62-year-old Ian Ashworth. She had been visiting her mother in hospital before the collision at 21:05 BST on 14 August 2023. Ashworth, of New Heyes in Neston, was given a 12-month prison sentence, suspended for 18 months, after admitting causing death and serious injury by careless driving at Liverpool Crown Court. Her mother's partner Bryn Jones, 81, who had been driving Ms Jones home from the hospital, was also severely injured in the collisionMrs Jones' husband of 50 years, Alan Jones, rushed to the scene on Thornton Common Road after his wife managed to her phone out of her bag and call him despite her injuries, the court heard. In a statement read at Ashworth's sentencing hearing, Mr Jones said: "I kissed her, promising her she would be ok. She said she was in so much pain."She said, 'please don't let me die'. I remained with her kissing her face and holding hands." Mrs Jones, a great-grandmother, died in hospital from her injuries three days later. Her husband told the court they had met on a school bus when she was 13 and had been saving money for their 50th wedding anniversary celebrations, due two months after the he said the money had to be used for her funeral instead."I visit her grave everyday as I don't want her to be alone", he said. "She was so afraid that evening and even managed to get her phone out of her bag to call me, desperate to see me. "How she managed to do that with those injuries she sustained I'll never know."Ashworth a former Royal Navy engineer, had been driving his Ford Fiesta and crossed into the oncoming carriageway near the Seven Stars pub. Eric Lamb, prosecuting, said neither driver had any recollection of the collision but a forensic expert concluded Ashworth's car "must have intruded into the south west lane". There was "no evidence of loss of control", said Mr suffered a ruptured spleen, which was removed, and fractured vertebrae and ribs. When interviewed by police, he expressed remorse and asked for his apologies to be passed Jones suffered fractures to his upper arm, collar bone, ribs and extensive bruising and was in hospital for more than two weeks. 'Truly tragic' Darren Finnegan, defending, said that Ashworth must have experienced "a momentary lapse of concentration". Mr Finnegan said his client was in hospital for 17 days and now walks with a stick."He has been described as a shadow of his former self," he said. Judge Robert Trevor-Jones said: "This is a truly tragic case. A life has been lost and another gravely affected."He said there was no suggestion that speed was a factor when Ashworth's car crossed into the oncoming lane. Ashworth was also ordered to complete 10 days of rehabilitation activities and banned him from driving for two years, with a requirement to take an extended re-test before getting back behind the wheel. Listen to the best of BBC Radio Merseyside on Sounds and follow BBC Merseyside on Facebook, X, and Instagram. You can also send story ideas via Whatsapp to 0808 100 2230.
