Report names and shames dire performing ‘dog’ investment funds holding £32.6 BILLION of savings

09 August 2019
 
  • The Spot the Dog report from Bestinvest, the online investment service, will this weekend name and shame the ‘worst of the worst’ investment funds, many of which are widely held in Individual Savings Accounts and pensions
  • The latest report has identified 59 serial underachieving funds, representing £32.6 billion of savings. These collectively rake in over £306 million of fees each year
  • The kennel club includes six Great Dane sized funds, each holding over a billion of assets, including the under fire Woodford Equity Income fund whose investors are currently blocked from withdrawing their money
  • Fund giant Invesco retains the Top Dog spot for the third time with six funds included totalling £11 billion of assets – a third of all dog fund assets
  • UK Equity funds are the most populated part of the Bestinvest hall of shame, with 20 funds identified. This is however a sharp drop from the 59 funds in the previous edition six months ago  
  • A full copy of the 24-page report will be available to download free of charge from midnight on Friday at www.bestinvest.co.uk/spot-the-dog

This weekend online investment service Bestinvest is set to publish the latest edition of its controversial bi-annual Spot the Dog report. The report, which is feared and loathed by City fund managers, will ‘name and shame’ those investment funds which have consistently delivered poor investment returns for investors.

The report covers stock market investment funds such as unit trusts and open-ended investment companies, which are widely held in private investors’ Individual Savings Accounts and pensions. Bestinvest has rounded up a pack of mutts that invest in a wide range of markets, including the UK, the US, Europe, Japan, the Asia Pacific region and Emerging Markets, as well as funds with a global remits.

To be included in the Spot the Dog report, a fund must have delivered worse returns than the market it invests in for three consecutive 12-month periods in succession and by more than 5% over entire three-year period assessed. These twin filters identify consistent poor performers rather than funds that may have experienced a short-term upset.

In total 59 funds worth £32.6 billion have made it into the latest Bestinvest kennel of shame, including funds from heavyweight financial institutions such as Invesco, BlackRock, Fidelity, HSBC, Janus Henderson and Standard Life Aberdeen, as well as FTSE 100 wealth manager St. James’s Place. This is broadly similar to the 58 funds worth £33.6 billion that Bestinvest snared 12 months ago, though down from the 111 funds worth £54.6 billion that appeared in the list six months ago. Much of the recent reduction is down to 39 fewer UK funds appearing in the list this time. Unfortunately, this has more to do with a difficult period of performance for funds with high exposure to medium sized companies in the run up to the 2016 Brexit referendum dropping out of the latest period of analysis than a turnaround in recent performance.

Jason Hollands, Managing Director at Bestinvest commented:

“Soaring global stock markets mean that even laggard investment funds have, in most cases, delivered positive returns over this period. While that might seem positive, it effectively means that strong overall markets have helped mask the failure of these fund managers to add any value for their ‘expertise’. We estimate that these funds are raking in a £306 million of lucrative annual fees from investors, many of whom probably assume they are doing a decent job and will be blissfully unaware they could have earned a much higher return elsewhere.

“Three funds in the report, however, did indeed manage the feat of actually losing investors’ money over this period, despite the rising tide of markets. These were the Woodford Equity Income, St. James Place UK High Income and Invesco UK Strategic Income funds. This trio of hounds collectively hold £5.2 billion of savings, with the Woodford Equity Income fund – the worst performer of all, managing to turn £100 invested into £80 over the three years assessed – currently suspended from dealing, meaning that its unfortunate investors cannot withdraw their cash, and are unlikely to be able to do so for several months.

“Woodford was also responsible for the dismal performance of the St. James’s Place UK High Income fund over this period. St. James’s Place recently terminated this relationship and handed the mandate to rival firms Columbia Threadneedle and RWC. However, with eye wateringly high annual fees of 1.67% on this fund investors could do a lot better elsewhere.

“In truth the funds in Spot the Dog represent the tip of the iceberg and there are many more funds out there delivering pedestrian returns that didn’t quite make the high threshold for inclusion. The difference in performance between the best funds and the worst is enormous and far outweigh variations in fees. Over the three-year period we looked at the range of returns on funds that invest in the UK stock market went from gains of 80% to a loss of 21%.

“If you are going to invest in actively managed investment funds it is vital to be very selective at the outset and then to regularly review your investments to make sure that they are delivering returns that more than justify their fees. There can be many reasons why a previously strong performing investment fund can turn sour, such as a change in the management team, a ballooning in size that makes it harder to manage or an approach that goes out of fashion, so it is important to keep a beady eye on your investments. The good news is that these days it is very easy and inexpensive to switch funds using online services such as Bestinvest and so there is really is no need to put up with consistent underachievers.”

- ENDS -

The Ten Biggest Beasts in Spot the Dog

 

Fund

Size

(£ bn)

Sector

3 year under-performance*

Value of £100 invested after 3 years

1

Invesco High Income (UK) Y

£7.01

UK All Companies

-21%

£102

2

LF Woodford Equity Income C

£3.71

UK All Companies

-38%

£80

3

Invesco Income (UK) Y

£3.08

UK All Companies

-21%

£103

4

Janus Henderson European Selected Opps I

£1.83

Europe Ex. UK

-6%

£134

5

BlackRock Continental European Income D

£1.60

Europe Ex. UK

-8%

£132

6

St James's Place UK High Income L

£1.28

UK Equity Income

-30%

£90

7

HSBC UK Growth & Income C

£0.91

UK All Companies

-8%

£119

8

MI Somerset Emerging Markets Div. Grth A

£0.89

Global Emerg. Mkts

-10%

£130

9

St James's Place UK & General Progressive L

£0.87

UK All Companies

-9%

£118

10

Fidelity American Special Situations W

£0.87

North America

-14%

£135

*This is the extent to which the fund has delivered a lower return over the three years to end June 2019 than the market in which it invests (after fees). The value of £100 after three years includes the reinvestment of any dividends.

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