M&G Investments has found itself in the unenviable position of topping Tilney Bestinvest’s latest Spot the Dog list of shame.
The high-profile fund house dominates the guide’s list, making up 41 per cent of all the assets included. This was due to the inclusion of its former flagship Recovery and Global Basics funds, which are £4.8bn and £2.5bn in size respectively.
The fund broker’s guide aims to identify the funds that have consistently underperformed during the previous three years.
In the three years to the end of July the M&G Recovery fund has delivered just 10.9 per cent, while its benchmark, the FTSE All-Share index, has returned 36.3 per cent, according to data from FE Analytics. Meanwhile, the M&G Global Basics fund delivered just 6.9 per cent.
The report noted “the turnaround in these funds has been painfully slow”, a situation reflected by a downgrade to the Recovery fund by Morningstar in January.
Graham Mason, head of investment at M&G, said: “We’re disappointed to be included in the report, but M&G’s funds are managed for long-term performance and we ask clients to take a similarly long-term view when investing.”
But investors have begun to grow impatient with M&G’s lacklustre performance and have been pulling money from the firm’s funds at a rapid pace.
M&G’s flagship Optimal Income fund, run by Richard Woolnough, has lost more than £2.5bn of assets under management in the past three months, according to data from FE Analytics and Morningstar. The fund’s performance has also been declining, recording a loss of 0.5 per cent for the year to date to July 30 compared with the IA Sterling Strategic Bond sector average return of 1.1 per cent.
Meanwhile, the Global Basics fund, which has been steadily losing assets since February 2013, lost £166.9m in the three months to the end of July. Over the same period, the Recovery fund lost £319m.
Mr Mason added: “More recently the [M&G Recovery] fund has had a stronger six months as a result of stock selection in healthcare and industrials in particular.
“The investment environment is shifting, company fundamentals are back in focus, and we see a more buoyant M&A [mergers and acquisitions] market. This plays well to the stocks held in the fund.”
Elsewhere, the report noted that Aberdeen Asset Management had two new “eyebrow-raising inclusions” in the list: the Asia Pacific Equity and Asia Pacific & Japan Equity funds. The inclusions are surprising as they are run by veteran manager Hugh Young and a well-regarded equity team.
In the report, Tilney Bestinvest said: “Aberdeen’s conservative positioning in these markets, being underweight both China and India relative to peers, have been contributing factors to the run of underperformance.”
An Aberdeen spokesperson said: “The liquidity-fuelled, indiscriminate rise in stockmarkets around the world over the past couple of years has not been conducive to our fundamental approach to investing, [which focuses] on balance sheet strength, the quality of management and the longevity of the business model.”
