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Categories:Investments

Dog fund assets leap 74% to £23.16bn in Bestinvest survey

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Nearly one in seven UK retail equity onshore funds are underperforming, as the overall value of assets in dog funds leaps 74 per cent to £23.16bn, according to Bestinvest’s latest Spot the Dog list.

The list shows 94 of the 682 funds, or almost 14 per cent, have failed to beat their benchmark index in each of the last three years, while underperforming the index by at least 10 per cent.

More than £23bn of UK investors’ money is sitting in underperforming funds in the nine sectors, up from £13.29bn in November 2010.

The sectors include UK all companies, UK equity income, UK smaller companies, Europe ex-UK, global emerging markets, Asia Pacific, North American, Japan and global.

IMA global sector funds were among the worst performers with 27 dog funds identified, up from 11 in 2010.

The top three fund management groups by assets under management on the list are Fidelity at £3.4bn, Newton at £2.1bn and BlackRock at £2bn.

The worst performing fund according to Bestinvest’s criteria was the £11.7m Allianz RCM global ecotrends fund, which was down 41 per cent over a three year period compared to the benchmark.

Bestinvest senior investment adviser Adrian Lowcock says: “The overall value of assets invested in dog funds has taken a shocking leap, rising over 74 per cent to more than £23bn.

“Once again it is clear that the industry has little appetite to address abject underperformance and that too few investors are willing to vote with their feet. Until they do it is doubtful whether fund managers will ever be sufficiently motivated to clear up after their dogs.”

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Readers' comments (2)

  • All of which, I have to say, goes to underline the validity of the FSA's RDR proposal that if intermediaries want to take trail commission (or whatever it'll be called after 2012) they should be obliged to articulate for their clients just what they're going to be offering in return on an ongoing basis. At its most basic level, that means monitoring and reviewing on a regular basis the performance of the funds in which the client has been advised to invest. If one or two of those funds have gone off the boil and don't look like they're going to regain their form any time soon, then a recommendation to switch (at no charge) has to be the order of the day. That's what I've been doing for the past ten years and virtually all my clients understand and appreciate the value of such service in the context of regular contact. It's a simple modus operandi, but it works. Yesterday's star performer may well be tomorrow's dog. Portfolios don't run themselves and if clients are going to be charged ongoing trail then they deserve ongoing service in return.

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  • @Julian

    Why no charge for the work - you can't just switch the clients funds without a suitable level of written authority, which means time and money.

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