Bestinvest’s Spot The Dog has become an investment institution as it reveals which managers should be put on a tighter leash as well as those who should be put out of their misery.
The report shows that 70 out of 698 funds qualified for the list by failing to beat their benchmark index in each of the last three years while underperforming the index by at least 10 per cent in that time.
Schroders topped the list, with both Andrew Rose’s £607m Tokyo fund and the £304m UK growth fund managed by Ed Meier and Vincent Vinatier contribu-ting to the £1,173m of “dog fund” assets in the firm.
Other notable names in the top five include Fidelity and Invesco Perpetual at £733m and £726m respectively, with the latter’s involvement largely down to the poor performance of its North American trio of funds. Manager Ian Brady left the firm in December.
Special attention has to be paid to Scottish Widows and Aberdeen, with the pair having seen under-performance across a number of funds.
Over half of Scottish Widows funds have failed to beat their benchmark in the past three years, with 9.5 per cent of the funds qualifying for dog status. Colin Beveridge’s £508m global growth fund is making its 10th consecutive appearance on the list.
Swip head of global developed markets Ian Vose says: “We put in place practical steps in relation to the structure and personnel within the global developed markets investment team over the past two years to create the environment to deliver improved performance.
“As a result of these changes, the team has seen improved performance in three of its four global funds and we are confident that this success will also be mirrored across our large-cap Japanese funds.”
Aberdeen is the fifth-worst performer on the dog list and 17.6 per cent of its funds are classified as dogs, with Bestinvest highlighting the underperformance of the £247m European growth and £262m Japan growth funds.
Hargreaves Lansdown investment manager Ben Yearsley says: “Aberdeen’s key strength has been in Asia and the emerging markets and it seems to have been a process they have implemented to other regions and it may not necessarily have worked. Europe and the UK is not particularly poor but I would not exactly buy anything at the moment.”
A spokesman for Aberdeen says the firm is aware that it has underperformed in those sectors and is putting additional resources into Europe and Japan, including more visits to the regions to keep a closer check on current and potential investments.
Bestinvest senior research analyst Stephen Marriott says: “Difficult markets have had a knock-on effect on funds with high exposure to the likes of banks but that does not excuse poor performance.”
Jupiter’s Anthony Nutt is the biggest casualty of the January 2008 Principal Investment Management White List, seeing his fund move to the grey list following a difficult 2007.
Nutt was one of four changes to the list, which picks the best 12 funds in the sector based on consistent total returns and risk over five years.
His disappearance from the elite band comes due to an early move to underweight mining stocks. In the first eight months of 2007, the £4bn fund made a loss of 2 per cent compared with a rise of 4 per cent in the FTSE All-Share index.
Nutt’s place in the White List goes to Neptune’s Robin Geffen who recently qualified for the list by achieving a five-year track record on his £562m income fund, which has ranked first quartile over one, three and five year periods in the IMA UK equity income sector.
Principal head of managed funds Charles Breeze says: “Geffen is unusual in running an aggressive portfolio of only 33 stocks and has deftly sidestepped weakness in the banking sector. The fund is likely to be an enduring member of the White List and a good complement to other more conservative managers.”
Other additions to the White List include the return of Carl Stick’s Rathbone income fund as well as Old Mutual equity income and St James’s Place UK equity income.
The trio replaced Ted Scott’s F&C stewardship growth fund, George Luckraft’s Axa Framlington equity income fund and Graham Ashby’s Credit Suisse alpha income retail fund, all of which have moved to the grey list following underperformance in the past 12 months.
Breeze says that in a year when low-yielding stocks head the leaderboard, investors should not really be surprised if their funds have not beaten the index. However, the bigger concern is that managers begin to move away from their discipline.
He says: “The long-term success of this sector has been achieved by focusing on the ability of companies to generate cash and deliver that cash to investors in the form of attractive dividend yields. As a salutary warning, the graveyard of former equity income managers is littered with the tombstones of those that chased the dotcom bubble.”
Wilson Dean Financial Services director Nick Lincoln says: “We would look at the White List but most advisers would be aware that Anthony Nutt has had a difficult 12 months but in the long-term he has a fantastic record. You could even take the contrarian approach and decide that now may be a good time to buy into a talented fund manager like Nutt.”