The new edition of Bestinvest’s ‘Spot The Dog’ guide to funds which have consistently under-delivered for investors shows a marked increase both in the number of funds in the dog house and in the amount of assets they manage.
The guide looks at UK domiciled open-ended funds and unit trusts which are aimed at retail investors and invest primarily in stocks, and compares their performance with an appropriate benchmark over three consecutive 12-month periods to flag up persistent underperformers.
LONG TAIL
The latest instalment picks out 86 funds it classifies as dogs, up from 77 in the previous edition, with the amount of assets held jumping more than 50% to £45.4 billion against £29.6 billion last time.
Much of the increase was due to the poor performance of global equity and global equity income funds, while overall there are a dozen £1 billion-plus ‘Great Danes’ on the latest list.
Three fund groups claim the top, or more accurately bottom, step - Schroders (SDR), St James’s Place (STJ) and Invesco.
While assets under management in Schroders’ poorly-performing own-brand funds isn’t substantial, as the report points out the firm ‘has its muddy pawprints on a number of other brands’ including HBOS and Scottish Widows.
After agreeing a deal with HBOS in 2018, Schroders runs the bank’s £3.79 billion UK Growth Fund and its £1.92 billion UK Equity Income Fund, ‘some of Spot The Dog’s most persistent offenders’ says the report.
The wealth manager also runs three Scottish Widows funds which make the list, UK Growth, UK Equity Income and European Growth.
Rival wealth manager St James’s Place outsources the running of its funds to external providers, which in theory means it can pick the best managers, but this strategy seems to have gone ‘a little paw-shaped’ with over £5.7 billion of underperforming assets.
The largest of its ‘unruly hounds’ is the £3 billion Global Equity Fund, although as the report’s authors acknowledge the firm recently switched its mandate to three new managers in the hope of achieving a balanced performance profile.
However, the regularity with which the firm’s funds appear on the dog list is ‘troubling given that the group runs an outsourced model’ says the study, especially when its fees consistently rank as ‘some of the highest in the sector’.
The third firm singled out for attention is Invesco. Although the number of its funds ‘in the kennel’ has fallen from 11 to just four, the UK Equity Income and High Income funds, which account for over £4.3 billion of assets between them, ‘just can’t shake off their doggy credentials’ say the authors.
In the latest report, the Invesco European Equity Fund also joins the list. While performance has picked up more recently, the fund is ‘still routinely lower than its benchmark’ the report concludes.
