North American dogs proliferating, finds Bestinvest

Bestinvest's latest Spot the Dog report highlights the sectors housing the greatest number of underperforming equity funds. The IMA global sector has topped this most recent round-up.

The second-worst performing sector was IMA North America, an area where Bestinvest says the failure rate for active fund managers is high. Eight out of 60, or 13 per cent, of North American funds are consistent underperformers according to the broker's analysis.

Investec American is the worst performer in the sector, delivering 26 per cent less than its benchmark, the S&P 500 index, over three years, although on a total return basis the fund has gained 11 per cent, or £11 on £100 invested.

This is closely followed by Cavendish North American and Melchior North American Opportunities, which have returned 23 per cent and 16 per cent less than the S&P 500 benchmark over three years.

European and UK-focused funds

Funds closer to home fared much better in the report, with not a single European ex UK or UK Equity Income fund rated a 'dog'.

According to data from FE Analytics, the two sectors have returned an average of 27 per cent and 38 per cent over three years respectively, while the only fund in either sector to deliver a negative return over three years is Elite Webb Capital Smaller Companies Income & Growth, which has lost 13.2 per cent during the period.

M&G retained its place as the worst-performing fund house overall, holding £10.7 billion of underperforming assets through its Recovery, Global Basics and American funds. This represents 55 per cent of the combined total assets of Bestinvest's 49 dog funds.

On an individual fund level, Standard Life's UK Smaller Companies was the most surprising 'dog'. Managed by the highly experienced Harry Nimmo, the £1.3 billion Money Observer Rated Fund is hugely popular with investors and over ten years has returned 294 per cent compared to 179 per cent from its sector, IMA UK smaller companies.

However, the fund's performance has waned of late, with Nimmo returning just 1.3 per cent over the past year compared to an average sector return of 15.8 per cent. This is largely due to the fund's huge 10.6 per cent loss year-to-date.

Despite this poor run, Hargreaves Lansdown's head of research Mark Dampier says investors should not necessarily sell out of Nimmo's fund.

'Nimmo has perhaps held his winners for too long; a lot of his stocks have sold off sharply. However, he is a long-term manager and long-term managers tend to underperform for periods of time. Over 10, 20 years small caps usually outperform the wider market,' he says.

Of the 49 'dog funds' identified by BestInvest, 15 were flagged in Money Observer's recent Deficient 50 report, including M&G Global Basics, Investec American, Fidelity Japan and Neptune Emerging Markets.

The antithesis of Money Observer's regular Consistent 50 analysis, which highlights consistently top-performing funds on a quarterly basis, the Deficient 50 lists those funds with the poorest three-year return.

Bestinvest 'Spot the Dog' funds
RankFundSector3-year return on £100 (£)
Relative 3-year return (%)1st-year return (%)2nd-year return (%)3rd-year return (%)
1
SF Webb Capital Smaller Companies Growth
UK Smaller Companies
44
-71119.0875.6948.82
2
FP HEXAM Global Emerging Markets
Global Emerging Markets
64
-32100.3993.6868.01
3
Neptune Emerging Markets
Global Emerging Markets79
-1699.1199.3979.79
4
Baring Emerging Markets
Global Emerging Markets81
-13100102.5279.38
5
Martin Currie China
Asia Pacific
89
-14100.63110.5679.93
6
Marlborough Far East Growth
Asia Pacific90
-13101.29106.2383.65
7
F&C Pacific Growth
Asia Pacific92
-14101.24108.5683.38
8
M&G Global Basics
Global
93
-2798.76109.7785.75
9
Neptune Global Special Situations
Global
95
-2599.23110.986.68
10
Schroder Japan Alpha Plus
Japan
96
-1997.04110.3389.6
11
PFS taube Global
Global
97
-28102.89105.1689.35
12
Neptune Global Equity
Global
100
-22104.72112.6285.11
13
SWIP UK Opportunities
UK All Companies
101
-22101.32116.7684.92
14
FF&P Concentrated UK Equity
UK All Companies103
-20104.13109.6390.11
15
Halifax Special Situations
UK All Companies105
-19104.56116.8385.55
16
Fidelity Japan
Japan
105
-1194.69118.8993.49
17
F&C UK Alpha
UK All Companies106
-18107.92110.5489.14
18
CF JM Finn Global Opportunities
Global
106
-17101.59116.7889.34
19
Axa Rosenborg Japan
Japan
107
-1095.74119.992.74
20
R&M Global Opportunities
Global
108
-16101.5120.4888.1
21
BlackRock Global Equity
Global
108
-16104.44118.6487.01
22
Marlborough UK Primary Opportunities
UK All Companies109
-1611.5115.8784.49
23
Investec American
North America
111
-26106.2612.5684.22
24
IFSL Harewood UK Enhanced Income
UK All Companies111
-12104.62110.9396.01
25
Psigma Global Equity
Global
112
-12103.02116.6293.32
26
M&G Recovery
UK All Companies113
-13107.41110.3995.16
27
CF Purisima Global Total Return PCG
Global
114
-15106.05120.4588.92
28
St James Place Ethical
Global
114
-15106.19118.0491
29
Ecclesiastical Amity International
Global
114
-14105.98122.7187.77
30
Cavendish North American
North America
115
-23105.88119.5191.08
31
JPM Global Consumer Trends
Global
115
-14105.85122.1588.85
32
Aberdeen Ethical World Equity
Global115
-14106.09117.1792.66
33
St James Place High Octane
Global115
-14107.09118.1591.05
34
Baring Global Growth
Global116
-10104.98115.3495.58
35
Schroder Global Climate Change
Global118
-12107.55122.6689.24
36
L&G Global Growth
Global119
-11107.74118.593.47
37
Schroder QEP Global Active Value
Global119
-11109.07121.3190.21
38
Aviva Investors Global Equity Income
Global119
-11105.89118.3295.31
39
Wesleyan International
Global120
-10108.91121.8690.3
40
Standard Life UK Opportunities
UK All Companies
123
-17116.74131.7780.18
41
Melchoir North American Opportunities
North America
124
-16106.45120.8396.75
42
Standard Life UK Smaller Companies
UK Smaller Companies
127
-16107.23130.1591.12
43
IFSL Harewood US Enhanced Income
North America127
-15103.5118.82103.37
44
Allianz US Equity
North America128
-14108.77120.1598.28
45
L&G North American
North America129
-14105.71119.28101.92
46
Psigma American
North America132
-11109.58115.47104.15
47
M&G American
North America132
-11107.08122.97100.53
48
Ignis Smaller Companies
UK Smaller Companies
134
-12112.04131.1390.96
49
JPM UK Smaller Companies
UK Smaller Companies138
-15114.43132.6591.19

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