Dog funds' named and shamed

26 May 2010

Investors are being urged to review their portfolios after a study revealed that more than £14 billion of money is tied up in badly-performing funds.

Ninety funds have been identified by financial advisers Bestinvest for underperforming their benchmarks in each of the past three years. The unit trusts and Oeics have also underperformed their benchmarks by at least 10% cumulatively over three years. In some of the worst cases the funds have actually lost investors half their money since 2007.

The worst UK and European "dog funds" include Gartmore UK Alpha, Henderson Higher Income, MFM Techinvest Special Situations and Artemis European Growth.

Further afield, the worst funds include Martin Currie Emerging Markets, Lloyd George Asia Pacific, Invesco Perpetual US Equity, JPM Global Equity Income and Legg Mason Japan Equity.

The number of "dog funds" has increased from 77 last October to 90 now. There has also been an increase in the money wallowing in the rubbish funds: in January 2009 there was just £7.2 billion, now there is £14.25 billion.

"The rise in the number of 'dog funds' is of greatest concern from our latest report," comments Adrian Lowcock, senior investment adviser at Bestinvest.

"It seems that more fund managers than ever before are underperforming their benchmarks and many investors are experiencing rank underperformance."

Bestinvest advises that if an investor has a "dog fund" in their portfolio they shouldn’t automatically sell it. "There may be valid reasons for the poor performance or it could be that the manager has recently been changed," the firm says.

Invesco Perpetual and Schroders were named and shamed as the biggest "dogs" in the investment world: they hold the most money in poor-performing funds. Invesco has £1.8 billion with its UK Growth and US Equity funds failing to deliver decent returns, while Schroders has £1.6 billion with its European and Mid 250 funds two particular duds.

Bestinvest says it is confident the poor performance at Invesco will not be tolerated for much longer by the firm and something will be done. However, it is concerned about the Schroder Mid 250 fund and thinks investors will lose patience and sell their holdings.

Henderson Investment Management, Scottish Widows and F&C Asset Management complete the top five worst fund management groups.


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