Invesco, one of the biggest fund managers, retained the ‘Top Dog’ spot for the fourth time with its number of poorly performing funds rising to 11, representing over £13bn of assets or 30% of the total.
In total 91 funds run by UK managers are named and shamed in ‘The guide fund managers would love to ban’ - up sharply on the 56 funds in the last report six months ago.
The 91 “underachieving” investment funds together receive over £410m in fees and costs each year, says the report.
*This is the extent to which the fund has delivered a lower return over the three years to end December 2020 than the market in which it invests (after fees). The value of £100 after three years includes the reinvestment of any dividends. Source: Bestinvest Spot the Dog report Feb 2020
Prominent among Invesco’s dismal performers are: Invesco High Income, Invesco Income and Invesco UK Strategic Income. However, the list of Invesco “hounds” also includes funds investing in Europe, the US and Japan.
In second place for funds groups after Invesco is JP Morgan, followed by Link Funds (former Woodford fund) in third place, fourth is Schroders and fifth is Hargreaves Lansdown. Each have one or more ‘dog funds.’
Dog funds are those that have performed “particularly badly” compared to their benchmarks. Investment trusts and investment companies are not included.
Dog funds must meet two criteria for inclusion: funds which have failed to beat their benchmark over three consecutive 12-month periods and funds which have underperformed their benchmarks by 5% or more over the entire three-year period of analysis.
Bestinvest, the online investment arm of Financial Planner and wealth manager Tilney, says inclusion is not a recommendation to sell but a nudge to investors to scrutinise the funds.
The list includes the final appearance of the former Woodford Equity Income fund – the worst performer in the report – “ahead of it being put down for good.”
One of the worst performing sectors was North American funds with 30% of US equity funds classified as dogs.
On the positive side Bestinvest says some fund managers have done well and deserve ‘a tummy tickle’ for avoiding any dog funds. The list includes: Aviva Investors, Baillie Gifford, BMO, Evenlode, First State, Fundsmith, Investec, Lindsell Train, Kames Capital, Legal & General, Royal London and Stewart Investors.
While many of the dog funds are relatively small in size, 11 were classified as ‘Great Danes’ with over £1bn of assets each. These include funds managed by groups such as Invesco, M&G, Hargreaves Lansdown and Schroders.
Jason Hollands, managing director at Bestinvest, said: “2019 was overall a fantastic year for stock markets across the globe, providing investors with double-digit returns.
“In such an environment it is all too easy to assume that the managers of your investment funds must be doing a great job. However, in many cases the returns enjoyed have had little do with the decisions taken by fund managers and they may be substantially lower than the gains delivered by overall markets.
“In these circumstances, investors have basically paid fees for little or no added value.”
• The 24-page report is available free to download www.bestinvest.co.uk/spot-the-dog