UK funds dominate the league of shame.

The latest bi-annual report from Bestinvest, names and shames 44 poorly performing funds, a 42% increase from the previous report.

The research-based study reveals that poorly performing funds hold £19.1 billion of investors wealth – nearly double the £10.7 billion recorded in the last edition.

Bigger funds did not avoid the meltdown. Six ‘Great Dane-sized funds’ – each over £1 billion in size - accounted for 70% of the lagging assets.

Bestinvest said that the UK equities sectors were home to the largest share of poorly-performing funds despite some improvement in UK blue-chip stocks over the period.

Bestinvest said that in the UK equity sectors the rising number of UK dismal performers was “in large part” caused by funds shifting weightings to medium-sized and smaller companies.   

The hybrid investment advice firm said it was “undoubtedly” a very tough 12 months for the markets in 2022, hit by the war in Ukraine, soaring inflation and energy prices and rising interest rates. 

The number of great Danes (funds with assets over £1 billion) rose to six, double the three in the last edition of the report.

Bestinvest says this highlights that investors are leaving their money with managers whose investment approach is “deeply out of step with the markets.” 

During the period, value investing – particularly in areas such as mining and energy – made a comeback and dividends became more important for investors again.  

Jason Hollands, managing director of Bestinvest, the online investment and coaching service, said: “We have been producing Spot the Dog for more than a quarter of a century, naming and shaming consistently underperforming investment funds to help investors take stock of their portfolio. The aim of the guide is to encourage investors to regularly check how their investments are performing and to assess whether action is required.  

“Take note, this edition of Spot the Dog includes several former high-flyers and once popular funds that have subsequently fallen on hard times. The difference between the best and worst performing funds cannot be explained by fees alone and ultimately comes down to the decisions taken. This underlines the need for investors to be super selective when choosing actively managed funds.”  

The latest report identifies 44 dog funds. While this is a 42% increase on the 31 funds named in the last edition in August 2022, it is still about half the 86 funds revealed in January of last year.  It is also remains lower than the 150 identified at the start of 2021.

To be included in the current edition, funds had to underperform in both markets that favoured ‘growth’ investing and more latterly a recovery in ‘value’.  

The most troublesome funds were found in the UK equities sectors, Bestinvest said. Assets in dog funds rose to £8.4bn from £5.5bn for the UK All Companies sector and to £3.1bn from £2.1bn for the UK Equity income sector.

The Global sector was the other weak spot. While the number of funds increased only marginally – from nine to 10, the assets in the weakest funds increased from £873.4 million to £4.49bn. The biggest culprits were the St James’s Place International Equity fund and the HL Multi- Manager Special Situations trust – adding £3.9bn to the total.  

Halifax UK Growth (£3.2 billion) was the biggest of the six Great Danes (see table below) with assets over £1bn on the list this year, with Invesco UK Equity High Income (£2.8bn) taking second position and St James’s Place International Equity fund (£2.2bn) third - representing a lot of investors’ savings in funds that should be doing better.  

The St James’s Place fund was one of two from large financial intermediaries with in-house funds on the list of dog funds this year. The large fund from St James’s Place was the only ‘dog’ from this company on the list this year, an improvement on its recent record, while Hargreaves Lansdown’s £1.8bn Multi-Manager Special Situations Trust was also the investment platform’s only fund to make the list.  

Other ‘Great Dane’ funds were Scottish Widows UK Growth (£1.8bn) and Halifax UK Equity Income (£1.7bn). These are repeat offenders in many cases, Bestinvest said.

Top 10 biggest beasts by size  

 Source: Spot the Dog, February 2023   

In terms of fund groups, HBOS topped the table again in terms of assets with £4.99bn of assets in three funds, while both Scottish Widows and Columbia Threadneedle were tied in terms of having the most funds at four each. 

Schroders had the largest number of funds. While Schroders only has three very small funds under its own name with £0.185bn in assets, it also acts as the underlying managers of the Scottish Widows-branded and HBOS funds (both parts of Lloyds Banking Group). That effectively adds another seven funds to its tally and takes the total amount where it has some involvement to £7.5bn. These funds were performing badly long before Schroders managed them, the report said.   

Other companies featuring prominently included Abrdn which has three funds on the list, totalling £545.5m. Meanwhile, Invesco has two, worth £2.96bn, and small and mid-cap specialist Unicorn, has three funds on the list this year, worth £474.7m. 

On the more positive side, Jupiter had three funds last time but does not appear at all in the latest edition. Baillie Gifford avoids the list for now, even after a tough year for its ‘growth’ style, thanks to a strong run before 2022. JP Morgan, BNY Mellon and M&G have all had poor funds in the past but are absent from the ‘doghouse’ this year, Bestinvest said.

Top 10 worst performing dogs overall  

Source: Spot the Dog, February 2023  

 • The report can be downloaded for free here: www.bestinvest.co.uk/investment-insights/spot-the-dog