£27 billion invested in underperforming funds
Nearly £27 billion is invested in underperforming funds, a sharp rise of £17.31 billion over the past six months.
Investment adviser Bestinvest's 'spot the dog' report found that £26.55 billion of UK retail investors' cash is invested in 113 'dog' funds, up from 44 since February.
One in every six funds is now considered a dog, according to Bestinvest. To qualify as a dog, a fund has to underperform its sector benchmark in each of the past three years and underperform its benchmark by at least 10% over the past three years cumulatively.
The global fund sector is responsible for the largest number of dog funds - 32 - while the North American sector houses 23 dog funds.
The worst performers
Once again, Scottish Widows and Scottish Widows Investment Partnership (SWIP) top the list as the fund management group with the most poorly-performing funds.
Dog assets have risen to £5.98 billion from £2.28 billion over the past six months, and two-thirds of its assets are now classed as underperforming. The group's UK, European and emerging markets funds have been panned by Bestinvest.
Schroders and Fidelity take second and third place, with £2.39 billion and £2.21 billion invested in poorly performing funds respectively. With regards to Schroders, the Schroder UK Mid 250 makes a sixth consecutive appearance as a dog fund, while at Fidelity the Fidelity American Fund, Fidelity International Fund, Fidelity MoneyBuilder Growth and Fidelity UK Growth continue to underperform.
M&G and BlackRock also house dog funds, with £2.02 billion and £1.39 billion of assets in these funds respectively.
Adrian Lowcock, senior investment adviser at Bestinvest, says investors pay around £390 million each year in charges to dog fund managers for these poorly performing funds.
He adds: "Investors simply can't afford to leave their precious savings languishing in dog funds and wait for the fund managers to do something about it.
"With markets trading in a range, it has 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."
This article was written for our sister website 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.