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Dog funds: the worst places to have your money invested

Dog funds: the worst places to have your money invested

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

John Fitzsimons

Investing and pensions

John Fitzsimons
Updated on 8 August 2022

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.

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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 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.

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Who let the dogs out?

Unfortunately, there are plenty of dog funds out there, though thankfully the number of dogs is on the decline.

In total, there were 31 funds identified, down from 86 last time out and 150 in the January 2021 edition of the report. There has also been a stark drop in the assets being held in dog funds, from £45.4 billion to £10.7 billion. 

Some of these individual funds are beefy too ‒ referred to as Great Danes in the report ‒ with three funds boasting more than £1 billion in assets 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.

HBOS and Scottish Widows get a big shout here. Between the two brands, a massive £6.7 billion in assets is held in dog funds.

Jupiter is also named by BestInvest here, with three dogs in the list, holding a whopping £774.7 million of assets.

On the plus side, things are improving at Jupiter ‒ last time out, it had six funds in the list.

That said all of this year’s dogs are new funds compared to last time, which as the report points out suggests there are “a large number of funds flirting with inclusion”.

Fidelity was named too ‒ even though there’s only one dog in the fund, its American fund, it’s a big one.

Shield your investments from the taxman with a Stocks & Shares ISA from Hargreaves Lansdown

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

Fund

Size (millions)

Sector

Three-year underperformance

Halifax UK Growth

£3,190

UK All Companies

-13%

Scottish Widows UK Growth

£1,829

UK All Companies

-11%

Halifax UK Equity Income

£1,705

UK Equity Income

-11%

Fidelity American

£808

North America

-29%

TM Crux European Special Situations

£618

Europe excluding UK

-10%

Jupiter UK Growth

£401

UK All Companies

-24%

Jupiter Global Managed

£333

Global

-8%

Scottish Widows UK Equity Income 

£314

UK Equity Income

-9%

MI Somerset Global Emerging Markets

£273

Global Emerging Markets

-10%

TM UBS Global Equity 

£195

Global

-18%

 

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

Fund

Sector

Three-year underperformance

FTF Martin Currie Global Unconstrained

Global

-34%

Fidelity American

North America

-29%

VT Avastra Global Equity

Global

-27%

Schroder European Sustainable Equity

Europe excluding UK

-27%

NFU Mutual Global Growth 

Global

-26%

Jupiter UK Growth

UK All Companies

-24%

AXA ACT Framlington Clean Economy

Global

-24%

BlackRock Developed Markets Sustainable Equity

Global

-20%

TM UBS Global Equity

Global

-18%

MI Somerset Global Emerging Markets

Global Emerging Markets

-16%

 

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.

Shield your investments from the taxman with a Stocks & Shares ISA from Hargreaves Lansdown

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