Worst performing investment funds worth £30bn are revealed in report
An online investment service, Bestinvest, has published it’s latest “Spot the Dog” report naming and shaming 77 investment funds which have consistently underperformed the markets they invest in.
Although 77 investment funds across a range of equity markets worldwide were identified in the latest report, which is published twice a year, it marks a sharp downturn from the 150 funds identified by Bestinvest in it’s last report six months ago.
Bestinvest ascribed the halving of the number of offenders to a “a surge in previously out-of-favour and economically sensitive sectors since last autumn,” which, it said, “has enabled many former offenders to escape the kennel.”
Bestinvest managing director Jason Hollands said in a statement: “The sharp rebound in some of last year’s worst hit sectors – such as energy and financials – has enabled a lot of previous offenders to escape inclusion as more recent, shorter-term performance has been strong, lifting them out of our filters. However, it is also the case that some fund groups are raising their game and have been taking action to address poor performance, including changing managers.”
The 77 investment funds identified, irreverently dubbed “dog funds”, collectively represent £29.5bn of long-term savings, the investment service company said.
HBOS, owned by Lloyds Banking Group, performed the worst with £6.85bn in five funds. The list of the worst performing funds included St James’s Place, with £3.9bn across four funds and Scottish Widows, with £2.7bn also across four funds.
Although the list encompasses global funds North America had the highest number of poorly performing funds – with just 22 per cent of funds meeting Bestinvest’s criteria.
Very few small company focussed funds were on the notorious list, including none investing in the UK, North America, Europe and Japan – which, Bestinvest said, suggested that “fund managers do a better job in less researched parts of the market.”
Equity markets worldwide have bounced back from the coronavirus crash in 2020, said Hollands, buoyed by ultra-low interest rates, massive financial stimulus programmes and optimism driven by the vaccine roll-out. As a result, Holland explained: “even funds that have failed to keep pace with the surge in markets have often deliver seemingly good returns.”
In most cases, he continued: “soaring markets have masked the fact that the decisions made by the managers of dog funds have actually detracted from the returns their investors might have received. Such funds represent poor value for money given the fees investors have paid.”
Hollands added that 21 of the funds in the latest report delivered losses over the last three years.
Dubbed “the guide fund managers would love to ban”, the Spot the Dog report has been published twice a year since the 1990s. Bestinvest say the report encourages investors to monitor funds held in their ISAs and pensions more closely as they highlight poor-performing investment funds.