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Has your fund lost you money? Report reveals worst performers over last three years

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12/08/2019
Three investment funds have managed to lose investors’ money despite “the rising tide of markets”, according to the latest analysis from broker Bestinvest.

The trio of funds were named in the bi-annual ‘Spot the Dog’ report as: Woodford Equity Income, St James Place UK High Income and Invesco UK Strategic Income.

Woodford Equity Income, run by fallen star manager Neil Woodford, was named the worst performer.

The fund, which has been suspended since early June after struggling to meet a rush of withdrawal requests, would have turned £100 into £80 in the past three years.

Woodford was also responsible for the dismal performance of St James Place UK High Income over the period, where investors would have made £90 from an initial £100 investment. St James’s Place dropped Woodford from running the fund in June and handed the mandate to rival firms Columbia Threadneedle and RWC.

To be included in the ‘Spot the Dog’ report, a fund must have underperformed its benchmark index for three consecutive 12-month periods and by more than 5 per cent over the entire period.

Overall, UK investors have £32.6bn sitting in 59 serially underperforming “dog” funds, according to Bestinvest.

These funds – from heavyweight firms such as BlackRock, Fidelity and Standard Life Aberdeen – are raking in an estimated £306m in annual fees.

Jason Hollands, managing director at Bestinvest, said: “Soaring global stock markets mean that even laggard investment funds have, in most cases, delivered positive returns over this period. While that might seem positive, it effectively means that strong overall markets have helped mask the failure of these fund managers to add any value for their ‘expertise’.”

He added: “The funds in Spot the Dog represent the tip of the iceberg and there are many more funds out there delivering pedestrian returns that didn’t quite make the high threshold for inclusion.

“Over the three-year period we looked at the range of returns on funds that invest in the UK stock market went from gains of 80 per cent to a loss of 21 per cent.”

Should you ditch a ‘dog’ fund?

Bestinvest points out that past performance cannot dictate future returns so funds in the list should not be sold automatically.

However, the firm suggests these funds require further investigation.

“There can be many reasons why a previously strong performing investment fund can turn sour, such as a change in the management team, a ballooning in size that makes it harder to manage or an approach that goes out of fashion, so it is important to keep a beady eye on your investments,” said Hollands.

The 10 biggest ‘dog’ funds in the report

Fund Size

(£ bn)

Sector 3 year under-performance* Value of £100 invested after 3 years
1 Invesco High Income (UK) Y £7.01 UK All Companies -21% £102
2 LF Woodford Equity Income C £3.71 UK All Companies -38% £80
3 Invesco Income (UK) Y £3.08 UK All Companies -21% £103
4 Janus Henderson European Selected Opps I £1.83 Europe Ex. UK -6% £134
5 BlackRock Continental European Income D £1.60 Europe Ex. UK -8% £132
6 St James’s Place UK High Income L £1.28 UK Equity Income -30% £90
7 HSBC UK Growth & Income C £0.91 UK All Companies -8% £119
8 MI Somerset Emerging Markets Div. Grth A £0.89 Global Emerg. Mkts -10% £130
9 St James’s Place UK & General Progressive L £0.87 UK All Companies -9% £118
10 Fidelity American Special Situations W £0.87 North America -14% £135

*Source: Bestinvest

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