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Large fund firm ‘dogs’ respond to Bestinvest criticism

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Scottish Widows Investment Partnership (Swip) has been named as the worst offender in the latest Bestinvest ‘Spot the Dog’ report and is joined by peers BlackRock, Baillie Gifford, F&C and Jupiter.

To find out how the groups reacted to their inclusion in the ‘dog’ list, see below:

Scottish Widows/Swip

The group had four funds included in the report, representing just under £4bn:

The £2.9bn Scottish Widows UK Growth fund managed by Mike Millington

The £824m Scottish Widows UK Equity Income fund managed by Chris Fontenla and David Keir.

The £196m Scottish Widows UK Select Growth fund managed by James Clunie.

The £112m Swip UK Opportunities fund managed by James Clunie.

Bestinvest says:

“This was the top dog in the house in our last report and has been a regular offender over many years so we could easily write up the same reasons as before. Swip has attempted to address the serial underperformance in its equities business in a major way: removing a number of UK equity managers and integrating those left into a global equity team.

“Several other funds have been closed and other mandates are now being managed on a ‘quant’ basis. We are watching these changes with interest but it will take time for the results to come through. Of particular interest is the new prominence given to fund manager-cum-academic James Clunie whose papers on short selling should be a must read for UK equity hedge fund watchers. His UK long-short equity fund Swip UK Flexible Strategy is showing signs of stardom. Gerry Ferguson’s Swip Property Trust has been unaffected by these changes and we continue to rate this three stars.”

Scottish Widows/Swip says:

“In April last year,  we began the process of repositioning our £54bn equities business to focus on global and specialist active equities in addition to quantitative equities.  We are completing the process of transitioning a number of  equities funds, including those named in the survey, to the new equities strategy. We remain committed to active equities management and will compete in those markets where we have confidence that we can generate strong investment performance.” 


Four funds, representing £1.2bn of assets, have appeared in the latest list. These are:

The £494m BlackRock UK fund managed by Nick Little.

The £653m BlackRock UK Dynamic fund managed by Mark Lyttleton.

The £63.1m BlackRock US Opportunities fund managed by Tom Callan & Jean Rosenbaum.

The £100.5m BlackRock US Dynamic fund managed by Chris Leavy and Peter Stournaras

Bestinvest says:

“BlackRock has risen three places on our dog list although total assets have fallen marginally. Nevertheless this is unfortunate for an asset management company that didn’t even feature 12 months ago despite being the world’s largest fund manager.

“BlackRock’s appearance is again largely attributable to two funds, BlackRock UK and BlackRock UK Dynamic. Together they constitute nearly 90 per cent of BlackRock’s dog fund assets. Both of these funds were managed by Mark Lyttleton although he relinquished the former in March 2012. However the change of manager does not appear to have affected performance greatly and it has not been able to leave the dog house. BlackRock’s continued presence in the doghouse is largely focused on its UK equity desk. Despite this, BlackRock manages some very successful UK funds, such as its UK Special Situations, which we rate highly.”

BlackRock says:

“The BlackRock UK and BlackRock UK Dynamic Funds have delivered solid returns for investors over the longer term, despite a recent disappointing period of performance.  We have a continued commitment to generating alpha on behalf of our investors.

“The BlackRock UK Dynamic Fund has provided investors with a return of +9.4 per cent annualised over ten years (to 31 December 2012) versus its benchmark, the FTSE All Share, return of +8.8 per cent.  The BlackRock UK Fund has produced a return of +6.9 per cent annually since its launch in 1993.  Since Nick Little took over the management of the UK fund over a year ago, we have restructured the portfolio and are focused on finding high quality long term investments which display genuine sustainable growth, a differentiated market position and cash generation.  We believe that with the current positioning of the Fund we can look forward to achieving better results for our investors in the future.”

Baillie Gifford

Baillie Gifford is a new entrant the Dog List with three funds representing £1.1bn of assets:

Bestinvest says:

“Baillie Gifford is an Edinburgh-based partnership with a history dating back to 1908. It is perhaps best known for running investment trusts, with the 103 year old Scottish Mortgage one of the largest in the country. However, it is its less well known Oeics that cause its appearance here, with three dogs making a show. The Emerging Markets Growth and Emerging Markets Leading Companies have different fund managers but similar underperformance, whilst at just £19m in size its struggling Greater China fund is reminiscent of that other small Chinese dog, the Shih Tzu. Baillie Gifford’s product range is generally strong.”

Baillie Gifford says:

“All three funds are managed by the emerging markets team. The emerging markets team have had a weak run versus the index. Some of their big core holdings have been hurt in share price terms. Several are in the oil & gas industry. The team see this as a short-term issue and they believe that their large positions in tech and energy will come good. over the last year or so we have seen big inflows into emerging markets ETFs and into Aberdeen emerging markets funds especially.

Financials are 30 per cent of the index and we don’t hold much there nor do we hold more conservative stocks such as tobacco which have been popular. We are looking at each stock in turn to re state the case for inclusion in the portfolios. However we remain confident that the market will recognise the worth of our holdings at some stage soon. In a nut shell our emering markets portfolios have been out of fashion – three years ago they were all the rage! Despite the last couple of years our Emerging Markets Growth fund remains first quartile over 10 years.

F&C Asset Management

F&C has £630m of underperforming assets across the three funds represented in the list:

The £325m F&C Pacific Growth fund managed by Anthony Linehan and Mark Perrin

The £288m F&C North American fund managed by Erik Rubingh

The £38.6m F&C Global Thematic Opportunities fund managed by Alice Evans

Bestinvest says:

“F&C has three pups in the list: F&C Pacific Growth, which has seen a number of changes in manager in recent years; F&C Global Thematic Opportunities, a fund with a bias towards sustainable investing and F&C North American, which is run using a quant model approach.

“Clients should take comfort that we have never rated any of these funds. Its American and global thematic funds are both bad but not disastrous when compared to respective peers. However, Pacific Growth is significantly below its peers and benchmark index. Given investors still have more than £300m sitting in this fund, something should be done to address this fund’s tyke tendency.”

F&C says:

“While certain market environments will favour specific investment styles or sectors, we do take any long term underperformance seriously, and we are working closely with the fund management teams to resolve this.”


Jupiter has two funds totalling over £500m of assets. These are:

The £197.2m Jupiter China fund managed by Philip Ehrmann

The £365.1m Jupiter Ecology fund managed by Charlie Thomas

Bestinvest says:

“Jupiter is a new addition to our list of dog houses and joins the list straight in at fifth. With more than £500m of assets in the dog house it would have barely have qualified in the previous publication.

“The culprits for its inclusion are two specialist funds; Jupiter China and Jupiter Ecology. The latter contributes the greatest share of the dog assets. The inclusion of Jupiter Ecology is a little unfair given that the niche mandate of this fund means that there is no benchmark that comes close to being a suitable basis for comparison. Jupiter Ecology invests in companies that are developing technologies and products that will help build a sustainable future. These companies are also socially responsible. As such its universe of investments is much smaller than the MSCI World Index, as well as being highly specialised, and performance can differ markedly during some periods.”

Jupiter says:

“As identified by Bestinvest themselves, the inclusion of Jupiter Ecology is explained by the niche mandate of this fund and the lack of appropriate benchmark, given its focus on developing technologies and products being delivered by companies that fit our sustainability criteria.

“With regards to the Jupiter China Fund, it clearly has had a difficult period whilst China has moved through economic and political change, particularly as the fund has a specific mid-small cap bias. However, Philip remains committed to his long term strategy which he believes will deliver strong returns over time.”

Spot the Dog

For a link to the full report click here.


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