£23 billion invested in 'dog' funds
A massive £23.16 billion is invested in underperforming 'dog' funds, according to BestInvest.
It represents a rise of 74% since the last 'dog' report in November last year.
The number of dog funds has risen to 94 from 90, with 27 of them in the Investment Management Association (IMA) global sector, up from just 11 last year.
Fidelity has £3.4 billion worth of assets labelled as dogs, with Fidelity European and Fidelity American Special Situations the worst performers. Newton, with £2.1 billion invested in dog assets, saw its global and European funds panned by the research.
BlackRock, Schroders and Scottish Widows brought up the rear, with £2 billion, £1.7 billion and £1.5 billion respectively languishing in dog funds. BlackRock's main UK equity offerings, the Schroder UK Mid 250 fund and SWIP's Europe and emerging markets funds were the main underperformers.
BestInvest also found that investors have stumped up £348 million in charges over the past 12 months for these dog funds, equalling well over £1 billion over the past three years.
Adrian Lowcock, senior investment adviser at BestInvest, comments that the industry has "little appetite" to address "abject" underperformance.
He adds: "With stockmarkets in turmoil, fund managers can no longer rely on rising markets to hide lousy performance. Meanwhile, investors simply can't afford to leave their precious savings languishing in dog funds.
"Now is the time for them to take action. It's never been more important for investors to take a close look at who is supposed to be managing their funds to make sure that their money is working as hard as possible for them."
To qualify as a dog, a fund has to underperform its benchmark in each of the last three years, and underperform its benchmark by at least 10% over the past three years cumulatively.
This article was written for Money Observer
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
A standard by which something is measured, usually the performance of investment funds against a specified index, such as the FTSE All-Share. Active fund managers look to outperform their benchmark index. Cautious fund managers aim to hold roughly the same proportion of each constituent as the benchmark, while a manager who deviates away from investing in the benchmark index’s constituents has a better chance of outperforming (or underperforming) the index.