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Britain’s worst investment and pension funds are named and shamed today in a “Spot the Dog” report published by financial advisers BestInvest.It identifies 153 funds with £23bn under management, that have underperformed the market in each of the last three years, yet they have charged investors around £1bn in fees. The worst offenders are those that invest in North American shares, but many emerging market and ethical funds have also performed poorly.
Dubbed “The guide that fund managers would love to ban”, BestInvest names Scottish Widows, BlackRock, Baillie Gifford, F&C Investments and Jupiter as the big investment management houses that are failing to deliver.
At the other end of scale, not a single fund from JPMorgan Asset Management, M&G, AXA Investment Management and BNY Mellon/Newton found their way onto the Dog list, despite each having a large number of funds.
Many of the worst funds returned 30% less than the average over three years. For example, the Standard Life UK Opportunities, named as the worst pension fund, gave investors a return of just 2% over three years, compared to the average 32% gain in the sector.
But at least the fund hasn’t actually lost money. The award for consistently bad performance, where investors have lost a large part of their capital, went to a fund investing in China, Brazil and Russia. The Hexam Global Emerging Markets has lost its investors nearly 10% over the past year and 13% over three years. Jupiter’s £200m China fund is also in the doghouse, after losing money over three years.
Despite China’s industrial might, the country has been a graveyard for investor expectations. Over the past five years, the Shanghai stock market index has fallen from 4,500 to 2,300.
Jason Hollands of BestInvest says: “Sadly, 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’. In our view, financial product providers too easily get away with dismal or uninspiring performance, benefitting from a combination of investor inertia and advisers failing to provide a satisfactory level of monitoring on investments they have previously recommended.”
Scottish Widows is named as the investment management group with the worst record. “It was top dog in our last report and has been a regular offender over many years,” says Hollands.
A spokesperson for Scottish Widows said: “In April we began the process of repositioning our £54bn equities business. We are completing the process of transitioning a number of equities funds, including those named in the survey … We remain committed to active equities management and will compete in those markets where we have confidence that we can generate strong performance.”
So should investors who hold “dog” funds sell out and buy something else? BestInvest says that management groups may be taking action to turn around the fortunes of a fund, but adds: “You should certainly explore further whether or not to stick with a fund if it appears in the guide. Neither should you assume that a fund is in the clear just because it isn’t in Spot the Dog. For every howler, there are many more pedestrian funds that have narrowly escaped and may be worth switching to better managers.”
A full copy of the report is available at bestinvest.co.uk/dogs
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This article originally appeared on guardian.co.uk
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