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.
While there can be reasons to persevere a little longer with a poor performer...in other cases it may make sense to switch to a different fund with a stronger team and track recordJason Hollands, BestinvestManaging 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
Source: Bestinvest
“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”.
If you want to be a successful DIY investor, then periodically reviewing and monitoring your investments is absolutely vitalJason Hollands, Bestinvest“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.
Schroders funds
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.
The three funds are the biggest on the “dog” list, managing £3.2bn, £1.7bn and £1.8bn respectively.
Schroders took over management of the Scottish Widows funds two years ago, and took over the Halifax funds before that.
“The HBOS [Halifax] funds in particular remain some of Spot the Dog’s most persistent offenders and their poor performance has continued through a range of market conditions,” the report said.
Jupiter performance
Beleaguered fund house Jupiter had three funds in the “dog” list this time, covering £774.7mn under management.
These were the Jupiter Asian fund, which lost 8 per cent in the past three years, the Jupiter Global Managed fund which lost 8 per cent, and the Jupiter UK Growth fund which lost 24 per cent in the period.
Although this is lower than the six funds which appeared on the last list, these funds are all different to the previous “dog” funds.
“This suggests there are a large number of funds flirting with inclusion, even if the names vary. This is worrying for a group that has built its reputation on skillful stock picking,” Bestinvest said.
Hollands added the report showed there is a big disparity between the best and worst-performing funds that cannot be explained by cost differences alone.
“The exceptional 12-year period of strong equity market performance that came to something of a halt at the end of last year meant that until very recently most funds investing in equities generated gains irrespective of the skill of their managers and this has helped to disguise poor relative performance and bad value for money,” he said.
In a bull market when most funds rise in value with the upward tide, he added, investing can seem all too easy but tougher times are a period to reflect on your approach.
“If you want to be a successful DIY investor, then periodically reviewing and monitoring your investments is absolutely vital and you need to be super selective in the funds or trusts you choose.
“If all this sounds like hard work…ready-made portfolios – which are managed and rebalanced for investors – are good options to consider and these days they can also be very cost effective too.”
sally.hickey@ft.com
