Investments managed by HBOS, Fidelity and Jupiter have been rated as the worst performing in the UK, with billions of pounds being wiped out in their so-called dog funds.
According to a half-yearly list compiled by online investment platform Bestinvest, three products offered by Lloyds Banking Group brands HBOS and Scottish Widows account for 62% of the £10.7bn in underperforming funds.
The Halifax UK Growth, Scottish Widows UK Growth and Halifax UK Equity Income funds, all sub-advised by Schroders, were singled out as the top three underperformers, overseeing more than £6.7 billion between them.
Bestinvest said it had been more than two years since Schroders completed the transfer of the Scottish Widows and HBOS funds following its wealth management tie-up with Lloyds in 2018.
“Investors would be forgiven for expecting to see an improvement in performance by now,” Bestinvest said in its report.
A spokesman for Lloyds Banking Group said: “We continue to take a long-term approach to investment management and continually work to improve the performance of our entire range of funds.”
Overall, Bestinvest identified 31 dog funds that earn asset managers almost £115m in annual fees, based on their current size and ongoing costs.
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To be included in the Bestinvest list, a fund must have underperformed its benchmark for three consecutive 12-month periods and must have underperformed its benchmark by 5% or more during that period time
Jupiter’s UK Growth and Global Managed funds were among the top 10 underperforming funds, managing just over £700m between them, while its Asia fund also made the wider list.
The three Jupiter funds included are down from the six that appeared in Bestinvest’s February report, although the current laggards are different from those that have appeared previously.
“This suggests that there are a large number of funds flirting with inclusion, even if the names vary,” Bestinvest said. “This is worrying for a group that has built its reputation on skillful stock picking.”
A Jupiter spokesman said it had made changes to the management teams of the funds listed in the report, including appointing a portfolio manager for its Asia fund with “a long track record of delivering leading returns”.
“Our expectation is that these actions will improve future outcomes for our clients,” the spokesman said.
Meanwhile, Fidelity’s £808m US fund, which has outperformed its benchmark by 29% over the past three years, also made the top 10 laggards list, having made appearances prior to the broader list.
A Fidelity spokesman said it changed the focus of the American Fund in 2020 from “a large-cap core style to a concentrated large-cap growth portfolio” following a product review. It also installed Jon Guinness and Sam Thomas as portfolio managers.
“We are confident that, over time, this management upgrade will provide customers in the future,” the spokesperson said.
Overall, the total number of underperforming funds identified by Bestinvest fell significantly compared to the 86 funds listed in its report six months ago, which were responsible for managing £45.4 billion.
Bestinvest said a change in the fortunes of funds that invest in undervalued companies and dividend-paying stocks meant that many of those that have dominated its previous lists have enjoyed stronger relative performance in recent months.
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Many growth-oriented funds that have suffered this year have also escaped the dog fund list due to their stellar performance over the previous two years.
Jason Hollands, managing director of Bestinvest, said the latest report “shows that there is a wide disparity between the best-performing and worst-performing funds that cannot be explained by cost differences alone.”
“The outstanding 12-year period of equity market performance that came to a halt at the end of last year meant that until very recently most equity funds made gains regardless of ability from their managers and this has helped disguise poor relative performance and poor value for money,” he said.
“In a bull market where most funds rise in value with the rising tide, investing may seem too easy, but tougher times are a period to reflect on your approach.”
Invesco was a notable absentee from Bestinvest’s most recent list of laggards, having consistently underperformed its UK equity income and income funds, which were previously run by star managers Neil Woodford and Mark Barnett.
At the start of 2021, Invesco managed £9.2bn across 11 underperforming funds, topping Bestinvest’s list for the sixth time in a row, but Hollands said the recent rally in value stocks had played in Invesco’s favour. , as have fund manager changes over the past two years.
Meanwhile, St James’s Place, which had six underperforming funds at £5.7bn in Bestinvest’s last report, had just one fund on the most recent list – its £127m continental European fund.
To contact the author of this story with comments or news, please email David Ricketts
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