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UK's worst performing funds revealed

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·3-min read
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A businessman checking stock market data
£29bn of investors' money is languishing in underperforming funds, according to the latest Spot the Dog report by Tilney Bestinvest. Photo: Getty

The number of underperforming stock market funds has nearly halved compared with the previous six months, according to the latest Spot the Dog report from Tilney Bestinvest.

The report highlights 77 investment funds that have consistently underperformed the markets they invest in, compared with 150 funds in the last report six months earlier. These funds collectively represent £29.5bn ($40.4bn) of long-term savings.

Bestinvest says this is due to a surge in previously out-of-favour and economically sensitive sectors since last autumn, which enabled many former offenders to escape the kennel.

Seven of the list hold more than £1bn in investor cash and are managed by some heavyweights of the financial services industry, including HBOS, Scottish Widows, St. James's Place, Fidelity and Abdrn (ABDN.L) (formerly Aberdeen Standard).

Lloyds Banking Group's (LLOY.L) HBOS, which holds around £6.9bn in five funds, has topped the list – knocking Invesco off the top spot after reigning supreme for the last five reports.

Invesco still has £5bn in three dog funds, but the direction of travel is improving following a shake-up at the group, Bestinvest said.

"Since the coronavirus crash in early 2020, equity markets around the globe have bounced back sharply, delivered impressive returns buoyed by ultra-low interest rates, massive stimulus programmes and optimism fuelled by the discovery and roll-out of vaccines," said Jason Hollands, managing director at Bestinvest.

Data: Morningstar
Data: Morningstar

"This has pretty much lifted all ships with the tide – so to speak – so even funds that have failed to keep pace with the surge in markets have often delivered seemingly good returns, though 21 of the funds in Spot the Dog did deliver actual losses over the last three years."

Other notable groups included St James’s Place, with £3.9bn across four funds, and Scottish Widows, with £2.7bn across four funds.

The report covers funds investing across a wide selection of markets, including the UK, Global equities, North America, Europe, Asia (excluding Japan), Japan and Global Emerging Markets in its quest to identify “the worst of the worst”. 

UK all companies dog
'UK all companies dogs'

Some areas are noticeably more prone to consistent underachievers, with the highest count – 19 funds – found in the North American sector (representing 22% of the North American funds universe), confirming its reputation as a region where fund managers struggle to beat the markets. 

This was followed by 14 European dog funds (14% of the European funds universe). 

In other markets dog funds are rare breeds. In the extensive UK All Companies sector just nine dog funds were uncovered. These represent just 3% of the universe of funds in the UK All Companies sector that were screened. 

UK equity income dogs
'UK equity income dogs'

Other areas where dog funds appear on the verge of extinction were Global Emerging Market funds (two funds) and Japan and Asia (excluding Japan) sectors, both of which had four dog funds each. Across all sectors, very few funds focused on smaller companies were found.

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