Dog funds: the worst places to have your money invested


Updated on 22 February 2021 | 1 Comment

Billions of pounds are languishing in underperforming investment funds. Here's a look at the 10 worst 'dog' funds.

When it comes to investing money, many of us turn to the expertise of professional stock pickers to decide where the best home for our cash is.

Rather than start reading the Financial Times and pick out individual listed businesses to back, we rely on fund managers to do that on our behalf.

The trouble is that while some managers do it well and end up delivering returns well above the market average, others have less than impressive records.

Twice a year, BestInvest publishes a ‘Spot the Dog’ report, highlighting the industry’s worst ‘dog’ funds ‒ in other words, the ones that have left investors with the least impressive returns.

How dog funds are identified

Investment is supposed to be a long-term activity ‒ you can’t judge an investment based on its performance over a few months.

With that in mind, BestInvest judges funds on how they have delivered over the previous three years.

To be classed as a dog fund, the fund needs to have delivered worse returns than the market in which it invests in for three consecutive 12-month periods.

And over that three-year period, they need to have underperformed it by more than 5%.

As a result, funds that have had an iffy year or which have been only a little worse than average aren’t flagged up as stinkers ‒ the report is picking out the worst funds that really are letting investors down.

Investing: Stocks and Shares ISAs, funds, risks and more explained

Who let the dogs out?

Unfortunately, there’s a significant number of funds that are classified as dogs.

A massive 119 funds dropped into dog territory this time around. While that’s down from the record 150 identified six months ago, it’s still up by a third on the number of dogs in the market a year ago.

The 119 dog funds hold a massive £49.6 billion between them, down from the £54.4 billion total six months ago.

Interestingly, many of these funds are on the smaller side, with the median fund holding £154 million. Despite this there are some absolutely massive dogs ‒ or as BestInvest refers to them, Great Danes ‒ who hold more than £1 billion of investors cash each.

The funds you should be worried about owning

It’s worth noting that some fund houses were particularly poor performers, with a host of their funds on the warning list.

A perfect example of this is Invesco, which has sadly been named the top ‘dog’ fundhouse for the sixth report in a row.

It has both the largest number of dog funds (11) and the most assets held within dog funds (£9.2 billion). Interestingly, a number of the funds have been handed to new managers, in the hope of a reversal of fortunes.

Jupiter has jumped from ninth spot last time out to take second place in the fund house ranking, with eight dog funds worth a collective £4.1 billion.

Its performance is largely attributed to having purchased Merian Global Investors last year.

Other fund houses to make the list include St James’s Place (four dog funds), Schroders (11) and JP Morgan (1). 

But what about the individual funds that are the biggest dogs? Here are the top 10 by fund size according to BestInvest:

 

Fund

Size

Sector

3-year underperformance

Invesco UK Equity High Income Fund (UK)

£3.21bn

UK All Companies

-21%

JPM US Equity Income Fund

£3.18bn

North America

-27%

SPW MM International Equity

£3.17bn

Global

-11%

St James's Pl Global Equity

£2.58bn

Global

-13%

M&G Global Dividend Fund

£2.37bn

Global

-9%

HL Multi-Manager Income & Growth Trust

£2.12bn

UK Equity Income

-5%

Merian North American Equity Fund

£1.96bn

North America

-14%

Invesco European Equity Fund (UK)

£1.62bn

Europe Excluding UK

-17%

Dimensional Emerging Mkts Core Eqty

£1.49bn

Glb. Emerging Markets

-9%

Invesco Income Fund (UK)

£1.48bn

UK All Companies

-19%

 

And here are the worst dog funds, based on their performance against the market.

Fund

Sector

Three-year under performance

M&G North American Value Fund

North America

-42%

GAM North American Growth Fund

North America

-40%

Legg Mason IF ClearBridge Glbl Eq Inc Fd

Global Equity Income

-39%

Fidelity American Special Situations Fd

North America

-38%

Ninety One Global Special Sits Fund

Global

-38%

Schroder Global Equity Income Fund

Global Equity Income

-36%

TB Saracen Global Income & Growth Fund

Global Equity Income

-35%

LF ASI Income Focus Fund

UK Equity Income

-35%

NFU Mutual Global Growth Fund

Global

-35%

UBS Global Enhanced Equity Income Fund

Global Equity Income

-35%

 
Unfortunately, there’s been a significant jump in the number of funds classified as dogs.

A massive 150 funds dropped into dog territory this time around, up by 65% from the 91 dog funds last time around, which in itself was a big jump from the 59 funds classed as dogs in the previous report.

Indeed, there have never been so many dog funds since the report was first published.

The 150 dog funds hold a massive £54.4 billion between them, up from £43.9 billion last time out. Interestingly while the number of dogs has jumped, many of these funds are on the smaller side, with the median fund holding £133 million. 

The funds you should be worried about owning

It’s worth noting that some fund houses were particularly poor performers, with a host of their funds on the warning list.

A perfect example of this is Invesco, which has sadly been named the top ‘dog’ fundhouse for the fifth report in a row.

It has both the largest number of dog funds (13) and the most assets held within dog funds (£11.4 billion), and has global funds, European funds, a North American, Asia Pacific and Japanese funds all with dog status.

As the report writers put it: “Pretty much every part of the globe can be accessed through an Invesco pooch!”

The second biggest fundhouse in the dog house is St James’ Place, jumping up from ninth place in the hall of shame last time around. It has eight dog funds, holding a total of £6.9 billion of assets.

Fidelity takes third spot here, with four dog funds worth a collective £3.9 billion, while other fund houses to make the list include Schroders (10 dog funds), Scottish Widows (three) and M&G (seven).

But what about the individual funds that are the biggest dogs? Here are the top 10 by fund size according to BestInvest:

Fund

Sector

Size

Three-year underperformance

Invesco High Income Fund

UK All Companies

£3.32bn

-26%

Scottish Widows MM International Equity Fund

Global

£3.02bn

-13%

St James’s Place Global Equity

Global

£2.44bn

-16%

Fidelity Special Situations Fund

UK All Companies

£2.25bn

-9%

Hargreaves Lansdown Multi-Manager Income & Growth Trust

UK Equity Income

£2bn

-12%

Halifax UK Equity Income

UK Equity Income

£1.79bn

-7%

Invesco Asian Fund

Asia Pacific excluding Japan

£1.55bn

-7%

Invesco Income Fund

UK All Companies

£1.54bn

-26%

Invesco European Equity Fund

Europe excluding UK

£1.53bn

-21%

Artemis Global Income Fund  

Global Equity Income

£1.43bn

-31%

 

And here are the worst dog funds, based on their performance against the market.

Fund

Sector

Three-year underperformance

LF ASI Income Focus Fund

UK Equity Income

-39%

L&G UK Alpha Trust

UK All Companies

-35%

MI Downing UK Micro-Cap Growth Fund

UK Smaller Companies

-31%

Invesco UK Strategic Income Fund

UK All Companies

-28%

Invesco UK Equity High Income Fund

UK All Companies

-26%

St James’s Place UK High Income 

UK Equity Income

-26%

Invesco UK Equity Income

UK All Companies

-26%

Jupiter UK Growth Fund

UK All Companies

-24%

UBS UK Equity Income Fund

UK Equity Income

-21%

L&G UK Special Situations Trust

UK All Companies

-20%

 

Don’t accept an underperforming fund

Obviously, all funds can have a difficult time, and if you genuinely believe in the fund manager and their approach to stock picking, then you might prefer to hold fire and try to ride out the troubles.

But many of us would be far better off by casting off the fund laggards and moving our money elsewhere.

There are plenty of fees to bear in mind though. Before you drop that dog fund, check exactly how much it would cost you to do so, and what fees you’ll face with whatever funds you would prefer to invest in.

Just moving to a new fund can’t be the end of it either.

It’s important you regularly monitor the performance of your money – but not too often – to make sure that it’s delivering the sort of returns you expect.

A winning fund today may be tomorrow’s dog, so keep a watchful eye on how it’s doing, and if standards drop consistently, then it may be time to move on.

Comments


Be the first to comment

Do you want to comment on this article? You need to be signed in for this feature

Copyright © lovemoney.com All rights reserved.