Aberdeen Standard Investments has been named the top offender in Bestinvest’s latest Spot the Dog report of underperforming equity funds.
In the first bi-annual report by Bestinvest for this year the asset management giant, which was formed after the merger between Aberdeen Asset Management and Standard Life last year, has four funds listed in the report with a total of £1.7bn in assets.
However, this is an improvement on previous years. In the July 2017 report, Aberdeen Asset Management had five funds listed and two years ago 11 of the firm’s funds were featured.
Aberdeen’s £1.3bn Asia Pacific Equity fund fared the worst, having lagged the MSCI AC Asia Pacific index by 10 per cent over the three years to the end of December 2017.
An Aberdeen Standard Investment spokesman says it is “encouraging” to see less funds managed by the group listed in the ‘doghouse’.
He adds: “Our Asia-Pacific fund has produced good returns but has lagged the benchmark as our fund managers have been cautious about investing in some of the high flying tech stocks. Similarly our UK and European funds have also produced reasonable returns for investors.
“The enlarged and strengthened UK and European equity teams and our focus on fundamental, in-house research, makes us confident that we will deliver for investors over the long-term.”
New to the list and in second place in terms of assets is Fidelity International with £955m in two funds.
One is the Fidelity American, which has seen a number of manager changes over the years, and the Fidelity Japan funds. Both funds lagged the respective indices – the S&P 500 and TOPIX – by 11 per cent over the three years to December.
A Fidelity spokesman says: “Fidelity manages 48 onshore active funds covering a range of styles, geographies and asset classes, the majority of which have outperformed their benchmark over five years, and are adding value to investors. We take extended periods of underperformance very seriously, and constantly monitor and review our fund range to make sure it meets the needs of our investor base.
“We have already taken steps to address this issue this by appointing new portfolio managers on both the Fidelity American fund and the Fidelity Japan fund in the last year. We are confident that, over time, this refresh in management will deliver for clients going forward.”
Funds that feature in the report have failed to beat their relevant benchmark over three consecutive 12-month periods and also by 5 per cent or more over the full three-year period. The report only analyses clean share classes.
Bestinvest says many fund groups – which have come in for criticism from the FCA on cost competition – might be showing signs of improvement.
Overall, 26 strategies made the list of underperforming retail equity funds, but this level was sharply down from 34 in the July edition.
The current level still represents £6.4bn of assets still held in consistently poor performing funds, down from £7.6bn in January.
Bestinvest attributes this drop to the absence in the list of the the £2bn St James’s Place Equity Income fund, which has “narrowly” avoided to fill in the company’s criteria for the list. However, the fund continues to lag its benchmark and might make it into the Bestinvest list in the future, the report says.
He says: “The median return across all dog funds listed in the latest report during 2017 was 10.8 per cent and only one fund actually failed to make investors any money and that was flat rather than a loss maker. In rocketing Asian and emerging markets, you could have even experienced returns of over 20 per cent last year in dog funds.
“Rising markets are likely to convince many investors that the fund manager’s their money is with are doing a rather good job when in fact they have detracted from the potential returns that could have made elsewhere.”