Scottish Widows has been labelled the top ‘dog' for the fourth time in a row in Bestinvest's latest ‘Spot the Dog' poll, but the number of funds failing to beat their benchmarks is now at least falling, according to the study.
Latest edition of the ‘Spot the Dog’ survey reveals the number of funds which qualify for ‘dog’ status – those which have underperformed its benchmark in each of the last three years and by at least 10% over that period – has dropped from 92 funds to 85 and the value of these funds has also increased by 8% to £10.8bn.
Scottish Widows and SWIP is reported to have topped the list of offenders for the fourth consecutive edition, as nine of its funds have failed to meet targets again and amount to £1.55bn in funds.
Henderson Global Investors also only managed to escape being named the worst offender, and subsequently fell into third place, because its European and preference and bond funds escaped “by the narrowest of margins” says Bestinvest.
Fidelity also made it onto the list in fourth position, continues the investment IFA, with £950m in ‘Dog’ funds, almost half of which is invested in Fidelity’s managed international fund.
And long-term pound resident the Manek Growth fund has continued to be included on the dog list, having failed for the fifth year in a row to beat the FTSE All-Share index and only managed to climb above the index twice, on a monthly basis, over the last 16 months, says Bestinvest.
The investment IFA argues investors are “bad at moving money away from long-term underperformers”, as clients still choose to leave their assets in funds such as Prudential’s £906m UK growth fund, says Bestinvest, perhaps in part because they hope investment returns will improve.
Dominic Cummings, Bestinvest director, argues the “dog” label does not suggest clients should sell any funds falling into this group, merely check to be sure they are happy to hold onto those investments.
"’Dog’ funds are not an automatic sell, but investors need to satisfy themselves that any ‘Dogs’ they own are worth holding onto,” says Cummings.
“It is also important to check their portfolio balance is appropriate to their needs. Poor asset allocation is often overlooked but can seriously damage a portfolio’s health. When transferring a ‘Dog’ elsewhere investors should not simply plump for a similar fund. It may be that transferring to a different sector could improve their portfolio balance,” he adds.
One of the funds which in the past received scathing comments from Bestinvest was Abbey’s £1.17bn UK Growth funds, but this time around escaped scorn and inclusion on the list.
Telephone Bestinvest on 0800 093 0700 to obtain a copy of the “Spot the Dog” review.IFAonline
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