View more on these topics

Who’s topped the latest Spot the Dog list?

Aberdeen reappears as the asset manager with the most poorly performing fund, alongside St James’s Place

Bestinvest spot the dog 07/14

Aberdeen Asset Management has been named the top offender in Bestinvest’s latest Spot the Dog report of underperforming equity funds.

The asset management giant, which is in the process of merging with Standard Life, last dominated the laggards in January 2016.

In the latest bi-annual report, Aberdeen accounted for 27 per cent of the total number of funds that were named and shamed, with five funds managing a total of £2bn in assets on the list.

Aberdeen’s £1.3bn Asia Pacific Equity fund fared the worst, having lagged the MSCI AC Asia Pacific index by 7 per cent over the three years to end of June 2017.

Aberdeen attributes the poor performance to the “Trump rally” seen in the second half of last year, in particular in emerging markets where the asset manager has always had a large presence.

An Aberdeen spokesman says: “Our investment process is focused on our teams undertaking fundamental research – meeting with management and analysing the balance sheet and business model – which means there will be times when we do underperform‎.

“But we firmly believe by engaging with management, undertaking rigorous due diligence and ignoring day-to-day market noise, long-term performance results.”

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.

One UK culprit

St. James’s Place is in second place with £1.7bn in three poorly-performing funds. The £1bn Equity Income fund, run by boutique RWC, was the biggest laggard despite levying an ongoing charge figure of 1.61 per cent.

The fund has lagged the MSCI United Kingdom All Cap index by 8 per cent over three years, according to Lipper.

However, since its inception in December 2000, the fund returned 202 per cent net of fees versus 136 per cent for the FTSE All-Share Index, according to SSGA and Bloomberg data.

Bestinvest attributes the poor performance of the fund to the manager’s value investing style, which has recently been out of favour.

To protect against high valuations in the market, RWC fund manager Nick Purves has held more cash in the SJP fund in the period reviewed by Besinvest. Higher levels of cash acted as a drag on relative returns while markets continued to rise.

Bestinvest argues the performance has also been hurt by the fund’s high cost which is “anything but value investing”.

The annual ongoing fee of the SJP Equity Income fund includes advice, marketing and distribution costs, according to the fund’s key information document. The fund does not have a clean share class with a track record of more than a year.

This was the only UK equity fund to make the list, down from six UK equity funds at the start of 2017, marking the lowest number of appearances for UK equity funds in the 20 years the report has been published.

FCA pressure or temporary blips?

Bestinvest says many fund groups – which have come in for criticism from the  FCA on cost competition – might be showing signs of improvement.

Overall, 34 strategies made the list of underperforming retail equity funds, but this level was sharply down from 41 in the January edition.

The current level still represents £7.6bn of assets still held in consistently poor performing funds, down from £8.6 in January.

Tilney Bestinvest managing director Jason Hollands says it is “encouraging” to see less underperforming funds in the list but he warns this might be either due to a technical blip or be a sign of a new and “more meaningful” trend.

He says the move towards clean share classes following the RDR may have boosted performance along with consolidation in the fund space.

But Hollands warns the reflation trade in the second half of 2016 will have supported value strategies, adding: “the jury is therefore out on whether the industry has really cleaned up its act.”

Hollands warns there are many other funds to watch out for which did not make it into the report.

He says: “These filters are only designed to highlight the ‘worst of the worst’ and there are a great many more pedestrian funds out there including closet-trackers which largely follow the index but charge excessive fees for doing so.”

Recommended

Sign-Signing-Letter-Contract-Business-700.jpg

FCA approves Standard Life Aberdeen merger

The FCA has approved the merger of Standard Life and Aberdeen Asset Management. In an announcement this afternoon, the companies stated that the regulator, along with the Prudential Regulation Authority, has confirmed its approval. With the deal due to complete in three weeks’ time, it still remains subject to regulatory approvals in other jurisdictions and to […]

Woodford-Neil-700x450.jpg

Neil Woodford: Closet trackers are finally coming under threat

While travelling around the country recently for the launch of the Income Focus fund, I have regularly been asked whether this is an appropriate time to be launching a new equity-based fund. There is a concern that eight years after the financial crisis and with UK equities not as attractively valued as they were, the […]

Andrew-Bailey-PRA-2013-500x320.jpg

FCA chief attacks managers keeping £100bn in ‘partially active’ funds

Financial Conduct Authority chief executive Andrew Bailey has hit out at fund managers for keeping more than £100bn in funds that are only “partially active.” The FCA is “not saying passive management is better than active”, Bailey says, but cites “strong and consistent margins” and unwavering charges in active funds compared to falling passive costs […]

Matthew-Pete-2012-700.jpg
9

Pete Matthew: Being an adviser is no mean feat

This is a rewrite of this column. I had finished a piece about my capacity issues at Jacksons and the lack of talent available to fill the needs of the business, particularly down here in Cornwall. But it felt a bit whiny, so I have started again. Instead, in thinking about the staffing needs of […]

Investment Clock Strategy Update

In his latest Investment Clock report Trevor Greetham, Head of Multi Asset at Royal London Asset Management, explains why he is ‘ready to buy dips’. Read the report here: The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Can someone help me out here:

    “The annual ongoing fee of the SJP Equity Income fund includes advice, marketing and distribution costs,”

    If the cost includes advice isn’t that commission?

    So it made 200% since inception in December 2000 – up till when?

    Invesco Perpetual High Income made 205.5% from 15-Dec-00 to 14-7-17 and Investec UK Alpha also made 200% over that period – to name but two at random. Also since RDR these will have performed even better as no commission will have been included to the charge which is significantly less than the highway robbery at SJP.

  2. What we need to recognize is Aberdeen purchased Scottish Widows unit Trusts who were laggards in investment managers for decades – perhaps centuries, and it takes sometime for these dog funds to be turned around. The prospect of Sub Standard Life purchasing the remnants of the effectively insolvent Scottish Widows, may mean more years of poor investment returns for the cartel of Edinburgh Insurance Company.

    • Scottish Widows are shortly to wind up their Safety Plus fund, the objective of which is (was) to deliver reasonably good returns with low volatility.

      With the fund’s current asset allocation being 96.48% Money Market instruments, they’ve certainly achieved the latter. Unfortunately, they’ve missed the former by a country mile and then some.

  3. The only good news we seem to hear these days about SJP is the increases in their FUM and profits.

Leave a comment