Invesco and Woodford top ‘dog’ funds list

Since the global financial crisis of 2008, low interest rates and central bank money printing have pushed share prices higher, helping to disguise bad decisions.

However, the unwinding of “quantitative easing” is removing this smokescreen and beginning to expose poor managers.

Despite this, investors are still entrusting billions of pounds to funds with pedestrian performance.

Jason Hollands, of Bestinvest, said: “It is essential to keep a beady eye on whether or not the funds you hold are adding value for the fees being charged, as many simply are not.”

The analysis shows that 111 funds now qualify for “dog” status, almost double the 58 found six months ago and four times more than this time last year.

These funds account for £54.6bn of investors’ cash, up from £33.6bn six months ago.

Asset manager Invesco is the worst offender for the second study in a row, overseeing seven funds in the “doghouse” totalling £13bn in assets.

Respected fund manager Mark

For the first time veteran manager Neil Woodford has made the list

Barnett, who replaced Neil Woodford at the firm, has three of his four portfolios on the list, including the £7.8bn Invesco High Income.

Woodford Investment Management is second, with the £4.9bn Woodford Equity Income fund making the cut.

Mr Woodford left Invesco in 2014 to set up his eponymous fund house and launch his flagship fund, quickly attracting huge sums from investors whom he rewarded through two market downturns. However, he has taken a controversial approach

in 2018 in 2019

There The has been a huge jump in i the number of dogs since last February

to British firms since the Brexit vote, buying a number of cheap, domestically-focused companies.

“These companies have been out of favour with investors in recent years. The fund has also been hurt by a number of stock-specific blow-ups and sizeable withdrawals from investors,” the report said.

Columbia Threadneedle is third, with the number of dog funds increasing three-fold from the last report to six, including the £2bn Threadneedle UK and £1bn Threadneedle European funds.

Artemis and St James’s Place, Britain’s biggest wealth manager, round out the top five.

On a more positive note, 13 fund houses avoided the list altogether, including Baillie Gifford, Man GLG and J O Hambro.

British funds are the worst offenders, according to the report. Income-focused funds performed particularly badly, with more than a third of the sector making the list.

One explanation is that lots of income funds hold positions in companies that pay consistent dividends, but are unloved by other investors more concerned with capital growth. This had led them to buy firms in sectors such as financial services and tobacco.

Income managers have also historically preferred small and medium-sized companies. As a result, they have suffered since the Brexit vote, as the larger international companies of the FTSE 100 have performed more strongly, owing to a weakening pound.

St James’s Place UK High Income and Smith & Williamson UK Equity Income top the list in this group.

British funds outside of the income sector have also struggled, with Jupiter UK Growth, Woodford Equity Income and Invesco UK Strategic Income topping the All Companies list.

There was some good news for Japanese portfolios, as the sector had no dog funds at all, having had two in the previous edition six months ago.

However, five funds from the emerging market sector made the grade, headlined by Threadneedle Global Emerging Markets Equity. Somerset Emerging Markets Dividend Growth – run by a firm set up by Jacob Rees-Mogg – was also included.