Money tied up in dog funds falls to £12 billion

Funds and Investment Trusts January 25, 2013 by Holly Black

The number of so-called ‘dog’ funds has fallen by almost half, according to Bestinvest. 

The amount of poor performing funds reached highs of 113 back in the summer, totalling assets of £26.6 billion. New figures now suggest this number has fallen to 64, representing less than half the amount of investment at £12.1 billion. 

For the first time pension funds have also been included in the research by the wealth management company and it has identified some 89 funds across six equities sectors that fit the ‘dog’ criteria. This encompasses £10.9 billion of investment.

To be categorised as a ‘dog’ fund, Bestinvest’s criteria states the fund must have underperformed in each of the last three years, and by more than 10 per cent over the three years to end of 2012.

The worst performance overall came from the Investment Management Association’s North American sector, which bred 18 dogs, according to this latest round of research.

Jason Hollands, managing director of business development and communications at Bestinvest, says high charges and poor decision making are often contributing factors in dog funds. He says the funds named and shamed in this research ‘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’.

Scottish Widows/SWIP, BlackRock, Baillie Gifford, F&C Investments and Jupiter have all been named. 

‘You should not automatically switch out of a fund just because it appears action may already be underway to affect a turnaround in fortunes,’ he adds, saying investors should also not assume their funds are ‘in the clear’ simply because they have not been outed this time. 

But it’s not all bad news, Bestinvest has also commended various fund managers who run a number of funds, none of which are in the dog house. JPMorgan Asset Management, M&G, Axa Investment Management, and BNY Mellon/Newton have all been praised.

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