The IMA Global Sector contains the largest number of under-achieving funds whilst the IMA North American sector has the highest proportion, according to the latest Bestinvest Spot the Dog research.
The latest edition of the report has identified 59 dog funds, down slightly from the 64 highlighted in January. However rising markets have helped swell the size of many underachieving funds so the level of dog assets has risen from £12.1bn at the start of the year to £13.3bn in this latest report.
The IMA North American sector had 21 per cent of its funds in the dog house while the global sector had 17 underperforming funds out of 110.
Among those in the US ‘doghouse’ list are the £214m Investec American fund, the £58m Cavendish North American fund and the £206m Legg Mason US Smaller Companies fund. The recommended alternative or ‘best of breed’ fund in this sector is the £295m JPM US fund.
Schroders was named as having the most underperforming fund assets, with £4.1bn, followed by Neptune with £1.4bn and Fidelity with £1.2bn.
However, Schroders has questioned the methodology used to compile the list as its institutional £3.2bn Schroder QEP Global Active Value fund was included, despite only holding £20m of retail money. If this was removed Schroders would be third on the list, ahead of F&C with £734m and UBS at £662m.
Schroders global head of marketing James Cardew says: “We are very disappointed by the analysis undertaken. It has failed to recognise the fund’s client base is overwhelmingly institutional. Less than 1 per cent of the fund is held by retail clients. We therefore believe the report is misleading.”
In response, Bestinvest managing director Jason Hollands says: ”The culprits for Schroders predicament are the Schroders US Mid Cap fund and a large fund with a value style bias, Schroders QEP Global Active Value. Schroders state that the latter is largely held by institutional rather than retail investors. Nevertheless, the fund is made available on a number of popular retail fund supermarket platforms – including Cofunds and Fundsnetwork – and clearly has a retail share class. It is therefore eligible for inclusion.”
When it comes down to those managing the largest number of dog funds, Neptune and Legal & General tie-jointly with five funds each.
Each of these funds met the criteria applied by Bestinvest of having underperformed in each of the last three years and by 10 per cent or more over the three years.
Hollands adds: “The tide of rising markets has lifted most ships over the last six months and that includes many funds which are nevertheless poor relative performers. It is a sad day when dog funds comprise a fifth of a sector and the ‘best of breed’ is a quantitative, black-box fund, JPM US. While some will see this as settling the argument decisively in favour of passive investing in the US a potential wind-down of Quantitative Easing and a pick-up in M&A could provide a lifeline to stock pickers.”
Invesco Perpetual, M&G, Threadneedle, First State, HSBC, Artemis, Cazenove, Aviva, Old Mutual and Royal London all had no dog funds in the current research.