Investors pulled a net £5.6 billion from the UK's biggest fund, Standard Life Investments' Global Absolute Return Strategies (Gars), in the first half of the year, after a sustained period of poor performance.
Half-year results from insurer Standard Life showed outflows from the group's flagship investment strategy have accelerated, after a poor 2016 for the fund, which fell 2.7% over the year against a backdrop of rallying markets.
Standard Life acknowledged 'a period of weak short-term investment performance in 2016' but highlighted an improvement since the turn of the year, with the fund up 4.4% over the 12 months to the end of June.
The £5.6 billion outflow comes after investors withdrew a net £4.6 billion in the second half of last year, with a combined net £10.2 billion having left the fund over the last 12 months. Shore Capital analyst Eamonn Flanagan said the Gars outflows were 'a particular worry'.
Despite this, the fund, which trades widely in different asset classes and currencies with a view to generating a positive return in all market conditions, remains the UK's largest, at £23 billion.
But the fund is facing competition from some of its former managers. Richard Batty, Dave Jubb and David Millar have amassed £10.4 billion for their Invesco Perpetual Global Targeted Returns fund which launched less than four years ago, and has delivered nearly double the returns of Gars, up 11.2% over the last three years.
Former manager Euan Munro meanwhile left to take up the chief executive role at Aviva Investors, overseeing the launch of its Multi-Strategy Target Return range of funds.
Speaking to journalists, Standard Life chief executive Keith Skeoch said Gars flows were stabilising and argued the group had diversified to counter over-reliance on the fund.
'We do more than Gars and if you look at growth flows across the channels there were about £1.2 billion of non-Gars flows coming onto the platform,' he said. 'You have to look at this in the round and see the benefits of diversification of these flows.'
Shares in Standard Life (SL) were down 1.2% on the news, with profits ahead of expectations at £362 million, up 6% on the same period last year.
The insurer's merger with Aberdeen Asset Management is set to complete on Monday.