Global funds made up the majority of the worst performing funds in the first half of the year, as economic headwinds buffeted markets.
Six of the top 10 worst performing ‘dog’ funds were in the IA’s global sector, according to Bestinvest’s latest Spot the Dog report.
The worst performing fund was the FTF Martin Currie Global Unconstrained, which lost 34 per cent in the three years to June 30 this year.
Second was Fidelity’s £808mn American fund with a loss of 29 per cent and third was the £6mn VT Avastra Global Equity fund losing 27 per cent.
Managing director of Bestinvest, Jason Hollands, said while short-term periods of weakness can be forgiven, as a manager may have a run of bad luck or their style may be temporarily out of fashion, there can be more concerning factors at work.
“[These can be] important changes in the management team [or] a fund becoming too big, which might constrain its flexibility or a manager straying from a previously successful approach.
Ten worst performing funds in the six months to June 30
“While there can be reasons to persevere a little longer with a poor performer – such as a change of manager or outlook – in other cases it may make sense to switch to a different fund with a stronger team and track record.”
In total, 31 funds were identified by Bestinvest as “dog” funds, less than half of the 86 funds identified in the last report, with the overall asset size dropping from £45.4bn to £10.7bn.
These funds are earning £115mn in annual fees based on their current size and annual ongoing costs.
Bestinvest said it might come as a surprise that the number of funds on the list has dropped, given the volatile market conditions seen in the first half of the year.
However, performance is measured against a benchmark index, meaning the fund must have underperformed compared to the market it invests in by 5 per cent or more over three years.
In order to be named as a “dog” fund, a fund has to have underperformed in three successive 12-month periods “on the trot”.
“While there are unfortunately plenty of funds that have undershot the markets they invest in over the last three years, a change in fortune for funds investing in undervalued companies, and dividend paying shares, means many of the funds that dominated the list in recent editions have escaped this time due to a much stronger relative performance in the last several months,” the report said.
A number of funds with Schroders as investment adviser appeared on the list, namely the Halifax UK Growth, Halifax UK Equity Income and Scottish Widows UK Growth funds.