34 funds you should probably ditch today
NEARLy £8bn of savers’ cash is languishing in 34 investment funds which are failing to keep up with their rivals, costing valuable returns every year.
These so-called dog funds have been identified by investment firm Tilney, which has highlighted UK equity funds across six regions which have underperformed their rivals’ average returns by 5pc or more for three years in a row.
There were fewer dog funds identified in this report compared to last year’s – a positive sign for the investment industry as it faces scrutiny over value for money.
After mostly avoiding Tilney’s last report, Aberdeen is now the investment manager with the largest sum of clients’ money in the list, with more than £2bn across five funds.
The firm’s emerging markets focus led to weaker performance in the second half of 2016 following the election of Donald Trump as US president.
It is also worth noting that a number of the funds on the list take a ‘value’ approach to investing, which sees managers buy undervalued companies they believe will increase over time.Value has been out of favour for some time as a result of low interest rates and levels of economic growth across the globe, but many believe this could soon change.
Jason Hollands, the managing director at Tilney, said: ‘ There are many different ways of investing, and some funds have distinctive styles or investment approaches that can go through periods that are deeply out of step with the current markets, but could be about to come back into favour.’
Rather encouragingly, just one dog fund was identified in the UK equity sector. This was the £1bn St James’s Place Equity Income fund, managed by Nick Purves, which has returned just £113 on £100 over three years and 8pc less than the MSCI United Kingdom index. High levels of cash have dragged on the valuefocused fund’s performance in recent times.
Out of five European equity dogs, the £53m IFSL Trade Union Unit Trust, managed by Aberdeen’s Global Equity Team, was the worst performer, returning £121 on £100 over three years, and 9pc less than the MSCI Europe index.
The £132m Jupiter China fund, managed by Ross Teverson, was identified as the biggest dog in the Asia Pacific equity sector.
The value fund has returned £144 on £100 over the period and14pc less than the MSCI China index.
ANOTHER value mandate, the £28m Jupiter US Small and Midcap Companies fund, managed by Robert Siddles, was the biggest North American dog. It has returned £131 on £100 over three years – 18pc less than the MSCI US Small Cap 1750 index.
The only dog fund in Japan was the £66m Canlife Japan fund, managed by Duncan Mackay. It has returned £143 on £100 over three years and 11pc less than the Topix index. The performance was probably hit by a change of manager in September.
But it is the global sector that features the largest number of dog funds, at 17.
Worst of these was the £6.8m Neptune Global Income fund, managed by Robin Geffen and George Boyd-Bowman, which has returned £120 on £100 over three years, and 23pc less than the MSCI World index.