Investment supermarket BestInvest names funds that it says have consistently delivered poor returns. The bad news is that the number of so-called ‘dog’ funds has almost doubled – rising by 91% in six months. BestInvest classed over 100 funds as ‘dogs’. Last time they did this report, there were under 60 funds in this category.
To qualify for the dubious honour of being named as a ‘dog’, a fund must have:
- Delivered a worse return than the area of the stock market it invests in, and
- Underperformed over three years in a row, and
- Underperformed by more than 5%.
Large and small dogs
There’s been an increase in the number of funds that are designed to produce an income that have under performed. Most of the funds that make it into the doghouse are smaller funds, although there are some large funds run by well-known names as well. Between them, these funds have over £50 billion of investors’ money in them.
There may be several reasons why a fund has under-performed, according to Jason Hollands, Managing Director at Bestinvest: “In each market the difference in return between the best and worst performing funds is huge. These differences in fortunes cannot be explained by variations in fees but come down to the decisions taken by the managers as to which companies to invest in. It is therefore vital for investors to choose their funds very carefully.”
Rising markets hide hounds
Until 2018, stock markets have been rising, and that’s hidden the fact that a number of funds have not performed well. But in the last few months, stock markets have been down more than they’ve been up.
20 biggest ‘dog’ funds
|Sector||3 year under-perform*|
|1||Invesco High Income (UK) Z||£7.85||UK All Companies||-19%|
|2||LF Woodford Equity Income C||£4.98||UK All Companies||-28%|
|3||Artemis Global Income I||£3.90||Global Equity Inc.||-16%|
|4||Invesco Income (UK) Z||£3.44||UK All Companies||-19%|
|5||Threadneedle UK Z||£2.04||UK All Companies||-7%|
|6||Janus Henderson European Selected Opps I||£1.93||Europe ex UK||-7%|
|7||St. James’s Place UK High Income L||£1.68||UK Equity Income||-30%|
|8||HL Multi-Manager Income & Growth A||£1.26||UK Equity Income||-11%|
|9||M&G Dividend I||£1.15||UK Equity Income||-15%|
|10||St. James’s Place Global Equity Income L||£1.06||Global Equity Inc.||-9%|
|11||Jupiter UK Growth I||£1.06||UK All Companies||-28%|
|12||Threadneedle European Z||£1.05||Europe ex UK||-10%|
|13||MI Somerset Emerging Markets Dividend Grth A||£1.02||Global Emerging Mkts||-14%|
|14||Invesco UK Growth (UK) Z||£1.00||UK All Companies||-7%|
|15||Aviva Investors UK Equity Income 2||£0.92||UK Equity Income||-8%|
|16||HSBC UK Growth & Income C||£0.89||UK All Companies||-13%|
|17||St James’s Place UK & International Income L||£0.86||Global Equity Inc.||-11%|
|18||Standard Life European Equity Income P1||£0.84||Europe ex UK||-9%|
|19||Janus Henderson Global Equity Income I||£0.78||Global Equity Inc.||-10%|
|20||Schroder UK Alpha Plus Z||£0.76||UK All Companies||-8%|
*This is the extent to which the fund has delivered a lower return over the three years to end 2018 than the market in which it invests (after fees). For actual returns on £100 invested, please see the full report.
Stick or switch?
If your money is in a ‘dog’ fund or you are worried about your investments, you should review them and carefully consider whether to stick with the fund or switch elsewhere, says Jason Hollands. “Funds can come bouncing back from rough patches and action may already be underway to improve performance, such as the appointment of a new manager, so it is vital to do some research before acting.”
You can download the Spot the Dog report on the BestInvest website.
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