The new edition of Bestinvest’s ‘Spot The Dog’ guide to funds that have consistently been underdelivered to investors shows a marked increase in both the number of funds in the niche and the amount of assets they manage.

The guide examines UK-domiciled open-ended funds and mutual funds that cater to retail investors and invest primarily in equities, and compares their performance with an appropriate benchmark over three consecutive 12-month periods. months to flag persistent underperformers.

LONG TAIL

The latest installment picks 86 funds which it classifies as dogs, up from 77 in the previous edition, with the amount of assets held jumping more than 50% to £45.4bn from £29.6bn the last time.

Much of the increase is due to the poor performance of global equities and global equity income funds, while overall there are a dozen billion-plus “Great Danes” pounds on the latest list.

Three groups of funds lay claim to the top, or more accurately, bottom tier – Schröders (SDR), St. James Square (STJ) and Investco.

Although Schroders’ underperforming private label funds’ assets under management are not large, as the report points out, the company “has its muddy footprints on a number of other brands”, including HBOS and Scottish Widows.

After striking a deal with HBOS in 2018, Schroders manages the bank’s £3.79bn UK Growth Fund and its £1.92bn UK Equity Income Fund, “some of the most persistent delinquents in Spot The Dog,” according to the report.

The wealth manager also manages three Scottish Widows funds that feature on the list, UK Growth, UK Equity Income and European Growth.

Rival wealth manager St James’s Place outsources the management of its funds to external providers, meaning in theory it can choose the best managers, but that strategy appears to have become “a bit of a paw shape” with over £5.7 billion of underperforming assets.

The biggest of its ‘unruly dogs’ is the £3bn global equity fund, although, as the report’s authors acknowledge, the company recently handed over its mandate to three new managers in hopes of achieving a balanced performance profile.

However, the regularity with which the company’s funds appear on the dog list is “disturbing given that the group operates an outsourced model”, according to the study, particularly when its fees consistently rank among “the highest”. of the sector”.

The third company to consider 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 together account for more than £4.3 billion in assets, ‘cannot just not get rid of their doggy credentials”. ” say the authors.

In the latest report, European equity fund Invesco also joins the list. While performance has picked up more recently, the fund is “still consistently underperforming its benchmark,” the report concludes.


Date of issue: February 16, 2022