The number of UK-domiciled funds that have underperformed for three years in a row has increased, with US rates and oil prices hitting performance.
Tilney Bestinvest, a wealth manager, found that in the second half of 2015 the number of underperforming open-ended investment companies and unit trusts increased from 37 to 54.
The firm publishes a ‘Spot the Dog’ guide twice a year and names so-called “dog” funds that have underperformed over three consecutive years and by more than 10% over the same period.
Managers – including Majedie Asset Management and Jupiter Asset Management – who caused the 46% rise in underperformers in the second half propelled assets in ‘dog’ funds from €23.2 billion to £23.7 billion.
Majedie and Jupiter appeared in the list for the first time with one fund each: Majedie’s €593 million UK Smaller Companies fund (which underperformed due to mining and energy stock exposure), and Jupiter’s €505 million North American Income fund (which has returned 31% over three years, against the Investment Association North American sector average of 40%).
Meanwhile, Aberdeen Asset Management continued to contribute the most funds to the list, with 11. The firm is also the underlying manager of three Scottish Widows funds, two Halifax funds, one TU Fund Manager fund, and one St James’s Place fund, which also appear in the rankings.
Despite having just four funds ranked, M&G maintains the dubious distinction of holding the most assets under management the list of underperforming funds (€8.4 billion), with €4.9 billion held in the serially underperforming M&G Recovery fund. In total, the firm manages assets of €326 billion.
Ongoing volatility surrounding interest rates and oil prices led North American equity managers into having the highest failure rate as a percentage of their own peer group. They had ten funds in the list and represented 18% of the total universe. However, the sector with the most underperforming funds overall was global equities, with 18 funds across the combined IA Global and IA Global Equity sectors featured.
But it was not all bad news for investors. Jason Hollands, managing director of communications at Tilney Bestinvest, said “dog funds are a rare breed when it comes to certain sectors”.
In UK Equities, only eight funds out of a universe of 246 underperformed the list’s criteria, and in Europe there were just four out of 97 funds.
“Many UK equity managers have outperformed the FTSE All Share index in recent times by avoiding or underweighting the troubled oil and gas and mining sectors, unlike index trackers, which have remained fully exposed to their sliding fortunes,” said Hollands.
©2016 funds europe
