Yahoo Finance Spot the Dog: UK's worst performing funds revealed
The number of funds that performed much worse than the market has jumped to 86, with assets held in “dog” funds surging by 54% to £45.4bn, according to an industry report.
The number of underperforming “dog” funds in the twice-yearly scorecard complied by investment provider Bestinvest, has increased to 86 funds, up 9 funds from the 77 reported six months ago.
The amount of investors’ money sitting in these underperforming funds surged 54% from £29.6bn to £45.4bn.
Based on their current size and ongoing fees, the latest dog list would generate annual fees for £463m in a flat market.
Jason Hollands, managing director of Bestinvest, said: “£45.4bn is a lot of savings that could be working harder for investors rather than rewarding fund companies with juicy fees.
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“At a time when investors are already battling inflation, tax rises and jumpy stock markets it is vital to make sure you are getting the best you can out of your wealth. While turbulence has increased recently, that’s no excuse for consistently failing to match benchmark returns, sometimes by drastic margins.”
JP Morgan’s (JPM) US Equity Income fund, which controls £3.92bn in investors’ money and underperformed its North America index by -32%, leads the list.
Number three on the list but the biggest Global Equity Income dog is BNY-Mellon Global Income Fund at £3.47bn, which lagged its benchmark by 26%.
The biggest UK dog-funds meanwhile are Halifax UK Growth (-10%) and Invesco UK Equity High Income (-29%), which Bestinvest says are no strangers to the online investment platform “kennel of shame.”
The fifth giant is the biggest Global equity dog. St James’s Place Global Equity with £3.05bn in assets did return 41% to investors but that was 23% worse than the index.
The only other fund apart from JPM US Equity Income to appear in the 20 worst performers list as well as the 20 biggest dogs is Janus Henderson Global Equity Income, that was 34% worse.
There are 12 funds in the list that control more than £1bn in assets.
Most underperforming funds were found in the Global and Global Equity Income sectors, which accounted for 39 of the 86 dog funds. These funds invest in the stock of companies based anywhere in the world.
Hollands said the underperformance was partly because the US has come to dominate the indices by which many funds are measured.
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“The MSCI World, for example, has around two-thirds of its market capitalisation in the US,” he said.
“Also, the technology sector has become increasingly important, particularly the mega cap technology names such as Meta (FB) (formerly Facebook), Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN).”
“This has presented a dilemma for active managers: either hold significant amounts in the US and technology stocks with the resulting lack of diversification and income, or risk weakness versus the benchmark,” he added.
In terms of companies with the most funds on the “dog list”, that distinction is shared between St James’s Place, abrdn and Jupiter with six funds apiece.
However, Jupiter’s six funds only total £988.6m, while abrdn’s are £1.84bn. This compares to £5.74bn for St James’s Place.
Schroders also makes the list by asset manager as it has five funds under its own name, housing £1.02bn in assets. But the fund house also manages the HBOS and Scottish Widows funds, which add another seven dogs and £8.62bn to its “paw print”.
Hollands said investors have to be selective when choosing where to put their money in.
“The UK has been an unloved market for the last few years, but in the calendar year 2021, the top fund rose 39.4%, while the worst eked out a meagre 0.5%.
“This highlights the need to be super selective when choosing a fund manager to look after your savings and, once invested, how important it is to continue to regularly monitor your investments and check whether they are delivering value for money."
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