Out of 69 funds in the sector, only 24 outperformed the Retail Prices Index and Consumer Prices Index.
These are the two key measures used for inflation. CPI is currently 4.2 per cent while RPI is slightly higher at 5.0 per cent.
Three funds beat the CPI but not the RPI. Some 18 funds delivered positive returns but still performed worse than the CPI, meaning a loss in real terms for investors.
These figures also do not include costs. If costs were taken into account then an even greater number would have failed to beat inflation.
The best-performing funds were the CF Odey UK Absolute Return Fund, the GLG Emerging Markets Equity UCITS III Fund and the Cazenove Absolute UK Dynamic Fund.
The best firm for funds was L&G with all three of its funds, the L&G Diversified Absolute Return Trust, L&G European Absolute Fund and the L&G UK Absolute Fund, beating inflation.
Michael Holland, managing director of FE, said: “While absolute returns endeavour to deliver positive returns, they have never promised to beat inflation. However, inflation is something investors must bear in mind if they want to preserve their capital and grow their wealth in real terms.”