£9 billion invested in shamed 'dog' funds

More than £9 billion is invested in poorly-performing ‘dog’ funds, according to investment adviser Bestinvest.

Despite the high figure, it marks a drop of £13.78 billion since the group’s last report in August.

The number of dog funds has fallen from 94 to 44, with the North America and global emerging markets sectors boasting no dog funds. At the other end of the spectrum, the UK equity income and smaller companies sectors both saw increases in the number of dog funds.

To qualify as a dog, a fund has to underperform its sector benchmark in each of the last three years, and underperform its benchmark by at least 10% over the past three years cumulatively.

Scottish Widows and SWIP, a ‘repeat offender’ according to Bestinvest, has £2.28 billion invested in poorly-performing funds. While the firm only has four dog funds, 27% of the company’s assets are invested in underperforming funds.

Scottish Widows Global Select Growth Fund, SWIP UK Income, Scottish Widows UK Growth and Scottish Widows UK Equity High Income were the main underperformers.

Meanwhile, M&G has £1.19 billion in dog assets under management, with the M&G Dividend fund panned by the research. Schroders has £1.17 billion invested in dog funds, with Schroder UK Mid 250 making the dog league for the fifth consecutive year.

Adrian Lowcock, senior investment adviser at Bestinvest, says despite the significant drop in dog assets, there still exist 108 funds that underperformed their benchmark by 10% over three years.

In addition, Lowcock highlights that dog managers take home £133 million in charges each year, or nearly £400 million over the three years they have been underperforming.

‘Investors simply can’t afford to leave their precious savings languishing in dog funds and wait for the fund managers to do something about,’ he says.

He adds: ‘It is not too late to do something about it and take decisive action. It has never been more important for investors to take a close look at who is supposed to be managing their funds to make sure that their money is working as hard as possible for them.’

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