The twice-yearly Spot the Dog report from Tilney Bestinvest, which is loathed by fund management companies, ‘names and shames’ the worst performing investment funds.

The latest edition, which includes data up until 30 June 2015, identified 37 ‘dog’ funds, down from 60 in January. Investors now have £17.6bn in these serial underperformers down from £23bn six months ago.

A ‘dog’ is defined as a fund available to retail investors which has underperformed in each of the last three consecutive 12-month periods, and by 10 per cent or more over the three years.

Featured US funds halve

With 13 funds across the combined Investment Association Global and Global Equity Income sectors, global equities remain the area with the largest number of ‘dogs’ – although this total represents a fall from the previous edition, which contained 19 funds.

Drops are also evident in US funds, a notable development as active managers often struggle to beat the S&P 500 Index. Six US funds feature this time, compared with 12 previously.

Featured Groups

Ranked by level of assets, M&G remains the leading ‘dog’, a position it has held in the past three reports, due to the continued inclusion of its former flagship M&G Recovery (£4.8bn) and M&G Global Basics (£2.5bn) funds.

Together, these two funds account for 41 per cent of all of the dog fund assets listed. Tilney Bestinvest attributes this underperformance to stock selection and sector allocation decisions.

Second place by level of assets is BNY Mellon subsidiary Newton whose flagship Global Income fund (£4.5bn) constitutes 26 per cent of total dog assets.

Aberdeen contributes eight funds to the rankings, a net fall of one from the previous issue. Two Aberdeen funds – Asia Pacific Equity and Asia Pacific & Japan Equity – feature for the first time.

Only two other firms – St James’s Place (3) and M&G (2) – have multiple funds in this edition. Neptune, which contributed five funds to the rankings in last time, does not feature.

Eight UK, European and Japanese equity funds feature in the report (one Japanese, two European and five UK).

Active UK equity managers have performed well against the FTSE All Share Index in recent years, which Tilney Bestinvest ascribes to their ability to overweight mid-caps compared to the Index (a part of the market that has performed exceptionally well) and steer clear of shares in large commodities companies.

The firm estimates that once index tracker funds are stripped out, 81 per cent of funds in the UK All Companies and UK Equity Income sectors beat the FTSE All Share over the three years to 30 June 2015, leaving UK All Share index trackers languishing.

Jason Hollands, managing director at Tilney Bestinvest, said: “The decline in the number of funds in this edition of Spot the Dog is clearly positive news but only time will tell if this is a temporary blip or represents a more significant shift in the fortunes of active managers. In fact most active fund managers investing in the UK market and Europe have now outperformed over three and five years – and that is based on their longest established share classes. Arguably the scope for outperformance should improve over time as the industry shift to lower cost share classes, stripped of commissions and platform fees, feeds through.”