Money Marketing asks the managers of dog funds to justify their underperformance and explain to investment advisers what they are doing to turn them roundThe number of “dog funds” has almost doubled in the last 18 months, according to Bestinvest.
There are now 72 funds in the kennel compared with 38 in January 2006, according to the adviser’s latest Spot the Dog guide. Of these, 27 are UK equity funds.
Bestinvest brands funds as dogs when they have underperformed their benchmarks in each of the last three years and also underperformed their benchmarks by at least 10 per cent cumulatively over that period.
Head of communications Justin Modray says some fund managers are serial offenders. Canada Life has been fingered as one of the worst culprits, having multiple funds on the list and the highest percentage of its funds in the doghouse at 57.9 per cent.
New Star is another investment house that has seen repeat appearances on the list.
The research shows that only 34 per cent of UK all companies funds have outperformed their benchmarks over rolling three-year periods over the last 20 years. The UK all companies sector has the second lowest level of consistent outperformance after the US sector, where only 32 per cent of funds have managed the feat.
Modray says: “We tend to find that more managers underperform during periods of volatile markets but it is clear that too many are simply not very good at their job.”