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| Over £14bn invested in poorly performing dog funds |
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The latest Spot the Dog report from IFA Bestinvest has discovered that there is a colossal £14.25bn invested in 90 of the worst performing funds in the market. These have failed to beat their benchmarks in each of the last 3 years with a cumulative shortfall of more than 10%.
Adrian Lowcock, one of the firm’s senior investment advisers, says that the most disappointing aspect is the fact that specialist managers like Invesco Perpetual and Schroders have more than a billion pounds in these poorly performing dog funds. “There are also a handful of companies with more than half of their assets under management (AUM) in this category.”
The worst culprit by value is Invesco Perpetual, which has £1.77bn in 3 dog funds including its UK Growth and US Equity products. Lowcock points out that although this is a lot of money it only represents 8% of their AUM and the company is already taking steps to address the underperformance.
Second on the list is Schroders with its European and UK Mid 250 funds accounting for £1.64bn. Both have appeared in previous Spot the Dog reports and have suffered an outflow of money which suggests that investors are finally losing patience.
Perhaps the most damning indictment is of Henderson, which acquired New Star last January. The expanded firm is now responsible for 8 dog funds that account for 59% of its AUM. “The merger has been a distraction for them although we are now beginning to see some improvements across their range of products,” notes Lowcock.
Over the long-term the negative effects of investing in bad funds can be enormous, so anyone with money in these products should think seriously about transferring it elsewhere. A sensible option would be to move it into one of the top funds in the sector which are also highlighted in the report.
“A dog fund should not be considered an automatic sell,” says Lowcock. “Investors need to check a number of factors including whether the manager is still the same and whether it’s an issue of an investment style being out of favour. If in doubt then an IFA would be able to help.”
The full report is available to download from www.bestinvest.co.uk/dogs
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