The number of consistently underperforming products at fund houses has dropped markedly according to Bestinvest’s latest Spot the Dog report, which saw serial offender M&G “finally escape” its list of shame.
Assets held in ‘dog’ funds – those that underperformed a benchmark by 5 per cent or more over three years – fell from £18bn to £8.6bn, in part because of some major M&G offerings leaving the list. The number of dog funds fell from 54 a year ago to 41.
M&G had dominated previous editions of the list. In last summer’s report, five of its funds – including the Global Dividend, Recovery and Global Basics offerings – represented £11.9bn of assets.
“At the group level, the biggest story is who no longer features in Spot the Dog,” Bestinvest said. “In the last edition, funds managed by Prudential-owned M&G accounted for 60 per cent of total assets. Encouragingly, not a single M&G fund features in this edition.”
The report added that “no single fund group dominates the hall of shame in terms of either the number of funds included or the level of assets”.
Aberdeen, another serial offender, had the largest number of dog funds with four, while Schroders led the list in terms of assets because of just one fund, the £1.2bn UK Mid 250 vehicle.
“UK mid caps have been a fertile area of the market in recent years but, despite this, the fund has had a rough ride,” Bestinvest said.
Schroders said the fund’s five-year performance was well ahead of the benchmark.
In terms of assets, underperforming offerings from Fidelity represented £1bn, with £744m sitting in Columbia Threadneedle’s underperforming Japan and Global Emerging Markets Equity products.
Aberdeen, the report noted, had been “one of the worst culprits” over recent years, in part because of its acquisition of Scottish Widows Investment Partnership, a number of whose funds had underperformed. But the asset manager has overseen a “steady decline in their number of qualifying funds and respective assets over the past 12 months”.
However, Aberdeen’s European Smaller Companies, UK Equity and UK Equity Income funds stood out for their underperformance, along with its North American offering.
The disadvantages of taking a house-wide investment approach – an issue previously highlighted in relation to Aberdeen – also affected Neptune, whose three dog funds held £482m in assets.
“Neptune funds’ adherence to a house view of the broader economy and markets meant that when things went wrong, they went wrong across the range,” said the report.
“The group has since revamped its approach, so far with mixed results – two global funds and its US fund reside in our doghouse.”
On a regional basis, global equities remained the area with the largest number of dog funds, with 16 across the IA Global and IA Global Equity Income peer groups. However these funds represented only 4 per cent of assets in the sectors, compared with nine North American equity names that made up 17 per cent of their universe.
