Swap your ‘dog’ fund for one with pedigree

Investors should consider ditching any of the 91 “dog funds” they own and swap to superior performers, a report has said.

The study, by fund shop Bestinvest, has named and shamed the worstperforming funds. To qualify for the list, a portfolio must have underperformed its benchmark index in each of the previous three calendar years, and by 5 percentage points or more over the entire period.

Inclusion in the “Spot the Dog” report is not an automatic signal to sell, the author said, but investors should re-evaluate their holding.

The report said: “Unless there are good reasons to believe performance will turn around, based on an assessment of its prospects, it may make sense to switch to a better portfolio.”

Jason Hollands, author of the report, outlined five funds investors should consider swapping to. These cover the sectors that include the highest number of “dog funds”.

There are 21 dog funds investing in British stocks, including Mark Barnett’s Invesco Income, High

Income and Strategic Income. There are also funds from Jupiter and M&G. In their place Mr Hollands advised investors to look at Liontrust Special Situations, run by Anthony Cross and Julian Fosh. “It is frankly everything you could want from a genuinely active British fund,” he said. It invests across the whole London market, including the Alternative Investment Market (Aim), and has consistently beaten its peers while outpacing the market by 31 percentage points over the past five years. For those who want income, he suggested Richard Colwell’s Threadneedle UK Equity Income fund. The portfolio mostly consists of large and mediumsized stocks and buys strong companies that pay secure dividends. Some 25 funds investing in global stocks were named as dogs, including Artemis Global Income. Mr Hollands said Fundsmith Equity and Lindsell Train Global Equity were obvious alternatives but Evenlode Global Income was a newer option investors could consider. There were 18 American dog funds, and 17 investing in Europe.

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Outperformance, in percentage points, by which Liontrust Special Situations beat the market over five years