Terry Smith in the doghouse over Fundsmith Equity underperformance
The largest fund in the UK, Terry Smith’s Fundsmith Equity, has been labelled an underperformer by the ‘Spot the Dog’ report for the first time in history.
The report from Bestinvest, which identifies the funds in the ‘doghouse’ due to persistent underperformance, saw the number of poorly performing funds rise sharply.
151 equity funds were identified by the report, holding £95.3bn of investor wealth, which is a 170 per cent jump from the previous report in 2023.
The value of assets held by dog funds was also up by a whopping 106% to £95.26 billion from £46.2bn last year.
The number of UK funds in the doghouse also rapidly rose, from only five in the last report to 34 this year, with assets held in underperforming funds rising 253 per cent to £12bn.
Fundsmith Equity has returned 28.3 per cent in the past three years, falling to the bottom half of performers in the IA Global sector.
Other star fund managers in the doghouse included Nick Train of Lindsell Train, manager of the fourth biggest fund in the UK.
Jason Hollands, managing director of Bestinvest, noted that both funds had a relatively concentrated portfolio that shied away from recent strong performers such as the energy sector, leading them to fall below their benchmark.
The worst performing fund identified was the Baillie Gifford Global Discovery fund, which is down 59.7 per cent over the last five years, compared to an IA Global sector rise of 22.1 per cent in the same time.
Funds are selected for doghouse due to both underperforming their benchmark for three consecutive years and underperforming by five per cent or more over the entire three-year period, Bestinvest explained.
| Worst performing funds | Value of £100 invested after 3 years | Three-year underperformance to sector (per cent) | |
| 1 | Baillie Gifford Global Discovery | £47 | -70 |
| 2 | SVS Aubrey Global Conviction | £71 | -62 |
| 3 | AXA ACT People & Planet Equity | £76 | -57 |
| 4 | FTF Martin Currie Japan Equity | £55 | -54 |
| 5 | Aegon Sustainable Equity | £79 | -53 |
| 6 | L&G Future Wld Sust. UK Eq Focus | £78 | -52 |
| 7 | Premier Miton US Smaller Cos | £72 | -52 |
| 8 | SVM UK Growth | £79 | -51 |
| 9 | L&G Future World Sust Eur Eq Focus | £73 | -51 |
| 10 | Baillie Gifford Japanese Smllr Cos | £60 | -49 |
In a statement, Fundsmith said: “As we have always said, a year is simply the time it takes for the earth to revolve around the sun.
“We think that investors should judge our returns over the long term, and since inception the fund is up 596 per cent or 15.7 per cent on an annualised basis, net of fees, compared with 11.8 per cent for the benchmark MSCI World.”