In its list of consistently poor performing funds that invest in stock markets, Aberdeen Standard Investments and Fidelity were named as the “worst of the worst”, with the former being the top dog in the July 2017 list too.
Dubbed as the leader of the pack of shame, Aberdeen Standard Life, which merged last year, had both the most number of dog funds, four, as well as the largest value of underachieving assets at £1.75bn ($2.4bn, €1.98bn).
However, this is an improvement on the 11 funds managed by Aberdeen Asset Management that were in the doghouse two years ago.
Meanwhile, in second place was the £995m fund giant Fidelity, which was absent from the previous report but has made a comeback after a rough period. Bestinvest said this could be owing to a change in fund manager last summer.
The Bestinvest report revealed that £6.4bn is languishing in consistently poor performing funds. The list is compiled of funds underperforming the market they invest in for the last three calendar years, and by more than 5% over the entire three-year period.
Still ahead
Jason Hollands, managing director at Bestinvest, said: “For investors, spotting a seriously underperforming fund has become incredibly difficult in recent years. Soaring stock markets mean that even funds that have lagged far behind have still made strong positive returns.
“The median return across all dog funds listed in the latest report during 2017 was 10.8% and only one fund actually failed to make investors any money and that was flat rather than a loss maker.
“However, the long bull-run investors have enjoyed will not last forever. When markets enter a more challenging period, as they will do at some point, being invested in laggard funds that charge fees but add no value could mean staring at actual losses.
“Do not assume an investment fund that has risen in value is necessarily in good health.”
While Bestinvest’s latest report names 26 funds, the lowest number for several years, the firm said it is still cautious about predicting their extinction.
Hollands added: “In the last five years, the number of dog funds has been as high as 60 and only two years ago there was as much as £18bn tied up in such investments.
“The drop in the number of both dog funds and the amount of investor money in these is very welcome. Only time will tell whether this is a temporary blip or a sign that the investment industry has got its house in order by replacing underachieving managers or merging away seriously failing funds.”
