Fund managers running abysmally performing funds are responsible for more than £23bn in assets, according to wealth adviser Bestinvest's latest Spot the Dog report. However, the number of poorly performing funds has reduced from 113 to 64 since Bestinvest's last Spot the Dog report in summer 2012. These 64 represent £12.1bn of assets in eight fund sectors. In addition to this, among unit-linked pensions funds there are 89 poorly performing funds across six equities sectors with assets of £10.9bn.
To be on Bestinvest's Dog list, a fund must have underperformed its benchmark over three consecutive 12-month periods, and by 10 per cent or more over the three years to the end of 2012.
The fund sector with the largest number of poorly performing funds is North America with 18, representing 31 per cent of the sector. Many managers fail to beat the US market and means some investors prefer to use passive tracker funds such as exchange traded funds (ETFs) for US exposure (see our suggestions).
The asset management companies with the greatest volume of underperforming assets are Scottish Widows/SWIP (£3.96bn), BlackRock (£1.27bn), Baillie Gifford (£1.08bn), F&C Investments (£613m) and Jupiter (£501m), the latter in large part due to one fund - Jupiter Ecology (GB0005812150).
A few asset managers have no funds in the Dog lists, including JPMorgan Asset Management, M&G, AXA Investment Management and BNY Mellon/Newton.
"The funds listed in Spot the Dog represent the tip of the iceberg of poor performance because the criteria we have set are designed to focus on the very worst of the worst," said Jason Hollands, managing director at Bestinvest. "You should not assume a fund is in the clear just because it isn't in Spot the Dog. If you hold investments, you need to periodically review them to make sure you are with managers who are delivering good returns that more than justify their costs.
"It is also important to emphasise that you should not automatically switch out of a fund just because it appears in Spot the Dog since action may already be under way to effect a turnaround in fortunes. But you should certainly explore further whether or not to stick with a fund if it appears in the guide."
We will be profiling some of these Dog funds over the coming months in IC's In the Doghouse column.
North America sector Dog Funds
| Fund | Three-year return on £100 | Relative three-year return (%) |
| Investec American | 97 | -28 |
| Legg Mason US Equity | 110 | -19 |
| BlackRock US Opportunities | 118 | -19 |
| Kames American Equity | 111 | -18 |
| Neptune US Opportunities | 111 | -18 |
| Allianz US Equity | 115 | -15 |
| CIS US Growth | 116 | -14 |
| UBS US Equity | 117 | -14 |
| Legal &General North American | 117 | -13 |
| Alliance Trust North American Equity | 118 | -13 |
| Martin Currie North America | 118 | -13 |
| F&C North American | 119 | -12 |
| Invesco Perpetual US Equity | 120 | -12 |
| Aberdeen American Equity | 120 | -11 |
| Blackrock US Dynamic | 120 | -11 |
| Marlborough North American | 120 | -11 |
| Legg Mason US Smaller Companies | 125 | -11 |
| Schroder US Smaller Companies | 126 | -10 |
Source: Bestinvest
