Nearly half of UK All Companies funds with higher volatility underperform over three years

Latest FE research

Increasing risk does not necessarily lead to higher returns in equity funds, according to research conducted by FE comparing vehicles in the Investment Association's UK All Companies sector to their FTSE All-Share benchmark, which found that nearly half of the funds with higher volatility underperformed over three years.

The analysis looked at cumulative returns of funds in the sector over three and five years from 30 November 2013 and 2011, respectively, mapped against their risk grading. It found although there was a tendency for higher-risk funds to outperform lower-risk vehicles over long periods, some 48.4% of funds in the sector that took more risk than the index underperformed over three years. KPMG: 'Progress to be made' in investment firms' management of risk Only 42.2% of funds that took more risk than the FTSE All-Share index, which has a three-year cumulative volatility score of 9.34, m...