How closely do you watch your investments? A new report has found that £17.6 billion of savers’ money is held in poorly performing investment funds. So whether it's your ISA or your pension, these are dreadful places to have your money invested.
Financial advisor and fund shop Tilney BestInvest has identified 37 funds that it believes are poor investments and has labelled them as 'dog' funds in its latest Spot the Dog report.
For a fund to win the dubious accolade of a dog fund it has to meet two factors. Firstly, it must have failed to beat its benchmark annually for the past three years. Secondly, over the same period it must have underperformed by 10 percentage points or more.
The good news for investors is the number of dog funds has fallen from 60 six months ago to 37 today. The bad news is some of the nation’s most popular funds are within the group.
Both the Aberdeen Asia Pacific Equity fund and the Aberdeen Asia Pacific and Japan Equity fund are in the so-called doghouse. The funds hold a whopping £1.8 billion of savers' money between them and are usually held in high regard. But over the past three years the Aberdeen Asia Pacific Equity fund would seen a £100 investment grow to just £112, while the best Asia fund (the First State Asia Pacific Leaders) would have turned it into £139.
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The funds in the dog house
Among the worst performers was the SF Webb Capital Smaller Companies Growth fund. This is one of the dogs of the UK Smaller Companies sector. Over the past three years a £100 investment would have shrunk to £74. In contrast the best fund in the sector, the ‘pedigree pick’ is Fidelity’s UK Smaller Companies which would have turned £100 into £215 over the past three years.
[SPOTLIGHT]Big names in the dog house include M&G whose Recovery fund is a UK Equity dog - over three years £100 in the funds would only be worth £115, compared to the best fund, Standard Life UK Equity Income Unconstrained, which would have turned it into £188.
Meanwhile Aberdeen Asset Management has eight funds that have been given the dog title, amounting to £3.3 billion assets under management. Partly this is due to the fund manager having Asian funds that were underweight in India so have missed out on that market rally, and the firm’s Asian funds general conservative positioning.
You can download a copy of the full report from the Tilney Bestinvest website.
Time to sell?
If you are invested in one of the dog funds it's time to take a good look at your investment portfolio. Just because a fund is a dog doesn’t automatically mean it should be sold.
The research “is based purely on factual analysis of past performance which is not necessarily a guide to how a fund will perform in the future,” says Tilney BestInvest in its report.
You need to consider why the fund is underperforming. Is it a result of the fund operating out of step with the market? Has a new fund manager or investment approach just come in that could improve things in the future.
“Spot the Dog is not a ‘sell’ list,” says Tilney bestinvest. “However, funds that appear in it do require further investigation. Unless there are good reasons to believe performance will turn around based on an assessment of its prospects, it may make sense to switch to a pedigree picks fund.”
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This article has been updated from an earlier version