You can run but you can’t hide, as the song says (The Razz, back in 1979, for trivia lovers), a feeling wearily familiar to under-performing funds mismanaging an astonishing US$10bn and named and shamed in today’s biannual Spot the Dog report.
Online investment service Bestinvest has identified 34 equity funds that are open to retail investors and that have consistently under-performed its benchmark for the past three years. They have also under-performed by at least 5% over the three years. Between them, the amount under (poor) management totals just shy of US$10bn.
Understandably, the report is loathed by fund managers — who likes their shortcomings to be exposed to the world, after all? — though there are some positives to be found in the latest report.
Bestinvest managing director Jason Hollands (pictured left) says: “Pleasingly there are just two funds that are ‘big beasts’, both have over a billion of assets, with most of the funds included in this report being pretty small in size.
“The overall drop in funds hitting our exacting criteria is also encouraging but it remains to be seen whether this is a technical blip or a sign of more meaningful trend coming through.”
Chief among the positives for the UK market is that only one UK fund — the St James’s Place Equity Income Fund — has made it into the hall of shame this time round, down from six UK funds at the start of 2017 and the lowest score for UK funds in the two decades that Bestinvest has been publishing Spot the Dog.
Another reason to be cheerful is found in Asia Pacific where Japan also has only one fund singled out. And no Global Emerging Market funds made the cut in this edition of the report.
Global equity ‘top dogs’
Commenting on the report, Tilney Investment Management Services says: “Even in the arena of US equities, a notoriously difficult market for active fund managers to add value and regularly one of the largest kennels, the number of funds that met the criteria for inclusion tumbled from nine at the start of 2017 to six.
“The biggest pack of dog funds continues to be found across the global equity fund universe, with 17 funds included (up from 16 in the last issue), but Bestinvest points out that eight of these have income generation as part of their brief which in most cases means they will have been underweight the soaring US equity market as it is relatively low-yielding.”
UK-listed Aberdeen Asset Management, which is currently in the process of a mega-merger with Standard Life, headed the hall of shame with over £2 billion of assets, representing 27% of the total, across five of its funds.
The primary culprit here is the firm’s £1.3 billion Asia Pacific Equity fund which has lagged the MSCI AC Asia Pacific index by -7% over the three years to end of June 2017.
Snapping at Aberdeen’s ankles in second place with £1.7 billion of assets in three funds is advice group St. James’s Place. SJP appoints external fund managers to run its fund and its main offender in this edition is its Great Dane sized £1 billion Equity Income fund, run by boutique RWC, which carries a hefty 1.61% pa ongoing costs.