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DFMs hold onto Barings Europe fund despite performance

Valentine's Day is not a time for being in the dog house so the latest Spot the Dog report from Bestinvest contains welcome news for the discretionary fund managers we cover.

The list of the UK's worst performing funds contains relatively few that are owned by professional fund buyers.

It includes funds that have both failed to beat their benchmark over three consecutive 12-month periods as well as having underperformed the benchmark by 5 per cent or more over the three-year period of analysis.

So which funds held by DFMs did make the list?

One was the Edentree Responsible and Sustainable Global Equity fund, which is owned by one of the allocators we cover, with another allocator having sold the fund in 2022.

It is, for obvious reasons, more popular in our ESG database where three DFMs hold it. But even there it is relatively unpopular.

For reference Ninety One Global Environment, the most popular global equity fund in ESG portfolios, is held by 10 DFMs while Schroder Global Sustainable Value is held by nine.

Indeed the only fund on the Bestinvest list which has a significant following among the DFMs we cover is Barings Europe Select, which is owned by four of the allocators we cover, though two others did sell out in the second half of 2022.

We asked a couple of the DFMs who hold it what they see in this fund but neither could offer any insight - on or off the record.

This £724mn fund is the most popular European smaller companies in our database - though to be fair this makes it the most popular of four (the others are Jupiter European Smaller Companies, Janus Henderson European Smaller Companies and Invesco European Smaller Companies - all held by one DFM each).

The IA European Smaller Companies sector has underperformed the IA Europe ex-UK sector over one, three and five years so perhaps the inclusion of the Barings fund has more to do with DFMs feeling they ought to have some exposure to that sector (we checked the factsheets and the holdings in question are all fairly modest).

Indeed against its sector the Barings fund has done alright, though there are funds which have done better and we will see if the DFMs which hold it look for better options.

In total, 44 funds made the underperformers list as defined by Bestinvest's criteria, with Schroders having the largest number of funds: three Asian equity funds run under its own brand and several segregated mandates it runs for Scottish Widows.

Investors in the Invesco UK Equity High Income fund have endured thin gruel in recent years, as the fund underperformed under Neil Woodford and then Mark Barnett, and flew the flag for value stocks as that flag got tattier and tattier. 

The fund is now run by Ciaran Mallon and James Goldstone, long standing members of Invesco’s UK equity team. The fund is not owned by any of the allocators we cover.

Now £2.4bn in size, it has lost 4 per cent over the past five years, compared with a gain of more than 20 per cent for the IA UK All Companies sector in the same time period.

Columbia Threadneedle has three funds on its list, all within its UK franchise. 

None of the impacted Columbia Threadneedle funds are held by any of the allocators we cover.

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