However, this is down sharply from the 199 funds identified in BestInvest’s previous report in February.

The list includes seven funds each holding more than £1bn of investors’ cash. These sizeable funds are managed by some of the financial services industry’s most recognisable names – HBOS, Scottish Widows, St. James’s Place, Fidelity and ABRDN (formerly Aberdeen Standard).

At the top of the hall of shame is Lloyds Banking Group-owned HBOS, with £6.85bn in five funds. It finally knocks Invesco off this unwelcome perch into second place after appearing top of the table for the previous six reports.

Invesco still has £5bn in three dog funds, but the direction of travel is improving following a shake-up at the group. Other notable groups included St James’s Place, with £3.92bn across four funds, and Scottish Widows with £2.73bn across four funds.

The sectors with the highest proportion of dog funds are North America, where 22% of funds met the demanding criteria used. But on a positive note, very few funds focused on smaller companies were identified as dogs – including none investing in the UK, North America, Europe and Japan – suggesting fund managers do a better job in less researched parts of the market.

BestInvest’s Spot the Dog report has regularly identified the most consistently poor performing investment funds available to the public since the mid-1990s. The report has helped shine a spotlight on the lack of value added by many investment funds.

In so doing it has encouraged hundreds of thousands of investors to keep a closer eye on the funds held in their individual savings accounts (ISAs) and pensions and as well as pressurising fund companies to take action where it is needed.

Selecting the ‘worst of the worst’

The report analyses funds investing in shares with a minimum track record of at least three years. Earning a place in Bestinvest’s investment kennel, requires a fund to have met some stringent statistical criteria.

Firstly, it must have delivered a worse return than the market it invests in for each one of the past three 12-month periods (periods to 30 June 2021, 2020 and 2019 in this edition). This is to focus the list on consistent underachievers rather than those that might have had a very short run of bad luck.

Secondly, a fund must also have underperformed the returns delivered by the market that it invests in by more than 5% over the entire three-year period under.

The worst markets for dog funds

The report covers funds investing across a wide selection of markets, including the UK, Global Equities, North America, Europe, Asia (excluding Japan), Japan and Global Emerging Markets in its quest to identify ‘the worst of the worst’.

Some areas are noticeably more prone to consistent underachievers, with the highest count – 19 funds – found in the North American sector. This was followed by 14 European dog funds.

In contrast the UK All Companies sector included just nine dog funds. Other areas where dog funds appear on the verge of extinction were Global Emerging Market funds (two funds) and Japan and Asia (excluding Japan) sectors, both of which had four dog funds each. Across all sectors, very few funds focused on smaller companies were found.

Jason Hollands, managing director at BestInvest, said: “Since the coronavirus crash in early 2020, equity markets around the globe have bounced back sharply, delivered impressive returns buoyed by ultra-low interest rates, massive stimulus programmes and optimism fuelled by the discovery and roll-out of vaccines.

“This has pretty much lifted all ships with the tide – so to speak – so even funds that have failed to keep pace with the surge in markets have often deliver seemingly good returns, though 21 of the funds in Spot the Dog did deliver actual losses over the last three years. But in most cases soaring markets have masked the fact that the decisions made by the managers of dog funds have actually detracted from the returns their investors might have received. Such funds represent poor value for money given the fees investors have paid.

“But on a more positive note, the latest report does show a sharp fall in the number of dog funds since our last edition. In a large part this is down to a much better period for managers who target cheap, undervalued shares rather than high growth companies.”