M&G is finally out of Bestinvest's 'funds doghouse' after reversing several years of underperformance.
A total of £11.9 billion in client assets were held in M&G funds offering medium-term, sub-index returns as recently as last June, according the previous Bestinvest Spot the Dog report published in June.
That fell to zero in the second half of 2016, as the overall volume of UK wealth invested in active funds offering below-benchmark returns dropped from £18 billion to £8.6 billion held in 42 funds.
The global equity sector had the largest number of dog funds at 15, with perennial underperformer North America holding nine funds.
On the flipside, there were no UK Smaller Companies funds in the Bestinvest report and across the UK All Companies and UK Equity Income sectors there were just six funds, representing 1% of combined assets. Only one fund was identified in the Europe ex UK sector.
With the bounce in M&G’s performance, Schroders now accounts for the largest share of underperforming assets, although at 12.8% its relative position remains a fraction of M&G’s former 60%.
‘Underperformance over the last 12 months was due to a large exposure to domestic stocks, which suffered due to a result of the European Union referendum. These are now recovering quickly as earnings and dividends come through as expected,’ they added.
The results, drawn from Bestinvest’s bi-annual Spot the Dog performance analysis also showed that Aberdeen held the highest number of underperforming mandates, with four on the list. This was down from 11 previously.
'While fund management companies like to push their star managers and the funds that happen to be doing well at the time, the reality is many of them will have skeletons in the closet that don’t get mentioned in advertising campaigns,' Bestinvest managing director Jason Hollands said.
'When all is going well, funds are heavily promoted and managers are feted like City rock stars. Yet some of these stars may have simply got lucky and turnout to be shooting stars that crash out of orbit.'