Inside Bestinvest's £54.6 billion funds doghouse

Neil Woodford’s torrid run has resulted in the UK’s most famous fund manager tumbling into online stockbroker’s Bestinvest’s Spot the Dog study of underperforming funds.

The manager’s £4.7 billion Woodford Equity Income fund, down 13.7% over the three years to the end of December, has entered Bestinvest’s list of funds which have underperformed their benchmark over three consecutive years, and underperformed by 5% over the whole three-year period.

It’s the first fund from Woodford Investment Management to enter the list, although it joins another fund run by the manager, the St James’s Place UK High Income fund, which he manages for national financial advice group St James’s Place.

The fund group topping Bestinvest’s study, with the highest number of assets in ‘dog’ funds, is Woodford’s former employer, Invesco. Nearly £11 billion of the £13 billion of Invesco’s ‘dog’ assets are accounted for by Woodford’s former funds Invesco Income and High Income, now run by Mark Barnett.

Click through the slides to see the underperforming funds named in Bestinvest's Spot the Dog report. To see all the slides on the same page, click here.

Next: number of 'dog' funds balloons

Number of 'dog' funds balloons

Group Number of dogs Value of dogs
Invesco 7 £13 billion
Woodford Investment Management 1 £4.7 billion
Columbia Threadneedle 6 £4.6 billion
Artemis 2 £4.6 billion
St James's Place 4 £3.8 billion
Janus Henderson 8 £3.8 billion
Jupiter 7 £1.8 billion
Schroders 4 £1.4 billion
HSBC Investments 5 £1.4 billion
Hargreaves Lansdown 1 £1.3 billion

The number of funds in the doghouse has nearly doubled since the last report in August, to 111 from 58, with dog assets up to a whopping £54.6 billion from the £33.6 billion recorded in the summer edition.

St James’s Place, a regular feature of the list, saw the number of its dogs double from two to four since the last report.

Aberdeen Standard Investments has managed a partial redemption, with four underperformers on the list, down from 11 from just the Aberdeen side of the business, which merged with Standard Life in 2017, during the worst of its poor run of performance in 2016.

Bestinvest managing director Jason Hollands said the sell-off in the last three months of 2018 would have delivered a shock to investors who have been used to bull market returns ‘oblivious’ to the fact they could have done better with their money held elsewhere.

‘Many investors will now discover that they’ve endured even worse absolute losses delivered by funds they have loyally held, where these have not managed to keep up with, or beat, the markets,’ he said.

Next: Woodford in the doghouse

Woodford in the doghouse

UK All Companies      
Jupiter UK Growth NEW LF Woodford UK Equity Income Invesco UK Strategic Income Legg Mason IF QS UK Equity
NEW Royal London UK Opportunities NEW Jupiter UK Alpha Invesco High Income Invesco Income
NEW Kames UK Opportunities NEW LF Canlife UK Equity Artemis UK Special Situations NEW Jupiter Growth & Income
Fidelity MoneyBuilder Growth HSBC UK Focus NEW Kames UK Equity NEW Invesco UK Opportunities
NEW Janus Henderson UK Responsible Income NEW Jupiter Responsible Income NEW Marks & Spencer UK Selection Portfolio HSBC UK Growth & Income
NEW Santander Premium UK Equity HSBC UK Freestyle NEW Scottish Mutual UK Equity Fidelity Institutional UK
Neptune UK Mid Cap NEW Janus Henderson High Alpha UK Equity NEW Schroder UK Alpha Plus Franklin UK Opportunities
NEW Invesco UK Growth NEW Threadneedle UK NEW Barclays UK Alpha NEW Threadneedle UK Extended Alpha
UK Smaller Companies  
Majedie UK Smaller Companies NEW Janus Henderson UK & Irish Smaller Companies

Escaped: Sanditon UK, Neptune Quarterly Income, Invesco Perpetual Income & Growth

Star manager Neil Woodford has made his first appearance in the dog list, as his £4.7 billion Woodford Equity Income fund got battered by punchy bets on the UK economy.

Reducing his exposure to large caps in favour of smaller and more domestic names has backfired. Holdings in financials and house builders have suffered under Brexit uncertainty, while his unquoted exposure has also hindered performance.

Provident Financial (PFG) was his most high profile blunder, as shares in the doorstep lender have continued tumbled amid a series of profit warnings. The lender remains the fourth biggest position in the fund.

He was also dealt a blow by troubled construction business Kier (KIE), when shares took a dive on November’s rights issue.

Purplebricks (PURP) is another gamble which has not paid off for Woodford, with shares in the online estate agent having more than halved over the last year.

St James’s Place UK High Income, also managed by Woodford, is meanwhile singled out as the worst performer among UK Equity Income funds over three years.

Another big-hitter on the UK All Companies list is Mark Barnett. His entry into the list last summer sent his employer Invesco to the top of the ‘dog’ list and he has failed to escape this time round.

Barnett’s Invesco Income fund is down 5.3% over three years to the end of December and his High Income fund has lost 4.6%. Barnett has also felt the pain of big bets on the likes of Provident and outsourcing group Capita (CPI), another stock that hurt Woodford.

Next: dividend hunters tumble onto list

Dividend hunters tumble onto list

UK Equity Income      
St James's Place UK High Income Smith & Williamson UK Equity Income Castlefield B.E.S.T. Sustainable Income NEW MGST Ardevora UK Income Institutional
Threadneedle UK Monthly Income NEW Legal & General UK Equity Income NEW Schroder UK Alpha Income NEW Premier Income
NEW HC KB Enterprise Equity Income NEW M&G Dividend NEW LF Canlife UK Equity Income NEW Merian UK Equity Income
NEW Premier Monthly Income NEW Liontrust Macro Equity Income NEW Janus Henderson UK Equity Income & Growth HSBC Income
AXA Framlington Blue Chip Equity Income Santander Equity Income NEW HL Multi Manager Income & Growth NEW Kames UK Equity Income
NEW FP Miton Income NEW Barclays UK Equity Income NEW Royal Bank Of Scotland Equity Income NEW Aviva Investors UK Equity Income
NEW BMO UK Equity Income      

Bestinvest's list of poor performing UK Equity Income funds attracted 18 new entrants in this edition, as income-focused strategies lagged the broader UK stock market.

Aviva Investors UK Equity Income was among the new entrants, an £882 million fund which has just gained a place on Hargreaves Lansdown’s Wealth 50 buy list, granting a substantial discount to its 0.81% annual charge.

On an investment of £100, Aviva returned just £11 to investors over three years, likely not helped by the fund having a third of its exposure to financials.

Hargreaves Lansdown’s own Multi-Manager Income & Growth fund also popped up on the income dog list, a £2.9 billion fund which has 14.1% of its portfolio weighted to Woodford Equity Income.

The fund supermarket recently appointed Threadneedle and Jupiter to each run a portion of the multi-manager fund. The use of ‘sub-advisers’ was intended to give Hargreaves more direct access to the fund managers.

M&G Dividend is another ‘Great Dane’ added to the UK equity income list, a £1.1 billion fund which has failed to scrape a positive return over three years.

Next: five new US 'dogs'

Five new US 'dogs'

North American      
NEW Standard Life American Equity Unconstrained NEW Royal London US Growth NEW Franklin US Opportunities Allianz US Equity
NEW Santander Premium US Equity NEW Scottish Widows American Growth    

Escaped: Fidelity American Special Situations, Threadneedle US Equity Income, JPM US Equity Income

A return of volatility to the US stock market amid trade tensions with China has resulted in five funds focused on the stock market of the world’s largest economy entering the ‘dog’ list.

The US stock market has substantially outperformed other major global markets over the last five years, but led the sell-off which plagued investors at the end of last year.

The number of ‘dog’ US funds has swelled from four to six over the last six months, with Scottish Widows American Growth the largest of the new entrants, at £486 million. Allianz US Equity has racked up its fourth consecutive appearance, though returns of 35% over three years show that even the poorest performers have made money amid the US rally.

Next: Bennett's 'dogs' double

Bennett's 'dogs' double

NEW FP Argonaut European Alpha Barclays Europe (ex-UK) Alpha NEW Invesco European Opportunities (UK) NEW Merian European Equity (Ex UK)
Invesco European Smaller Companies BMO European Smaller Companies Ex UK HSBC European Growth Schroder European Recovery
Liontrust European Income NEW Threadneedle European NEW Standard Life European Equity Income NEW Fidelity European Opportunities
Legg Mason IF Martin Currie European Unconstrained NEW PUTM European NEW LF Canlife European Janus Henderson European Selected Opportunities
NEW Janus Henderson European Focus FP CRUX European    

Escaped: TM Sanditon European, AXA Rosenberg European, AXA Framlington European

John Bennett’s £223 million Janus Henderson European Focus fund has joined his £1.8 billion European Selected Opportunities fund on the list, amid a tough run for the value-focused manager, whose deputy Andrew McCarthy has left after just six months.

Both funds are up 15% over the three years to the end of December.

Among those that managed to stage an escape from the list was Sanditon European, run by Chris Rice, whose bearish stance was finally rewarded by 2018’s stock market falls. The group’s UK fund, run by Julie Dean, also shook off its ‘dog’ status this time round.

Next: Aberdeen funds escape doghouse

Aberdeen funds escape doghouse

Asia Pacific    
NEW Jupiter Asian Allianz Total Return Asian Equity NEW Neptune China

Escaped: Jupiter China, Aberdeen Asia Pacific Equity, Aberdeen Asia Pacific & Japan Equity

Aberdeen Standard Investments may have four funds on the list, but that’s an improvement on the 11 funds branded ‘dogs’ from the Aberdeen side of the business alone in 2016, before the fund group’s merger with Standard Life a year later.

Two of its Asia Pacific funds have managed an escape, the £736.1 million Aberdeen Asia Pacific Equity and £107.2 million Aberdeen Asia Pacific & Japan Equity funds. Both funds are managed by Aberdeen Standard’s Asia Pacific equity team, headed by Hugh Young.

That has left Asia Pacific as the smallest ‘dog’ sector in Bestinvest’s report, with £109 million of assets spread between just three funds.

Two are new entrants, while the repeat offender, the £40 million Allianz Total Return Asian Equity fund, has notched up its fourth entry in a row.

Next: Turkey trouble for Somerset

Turkey trouble for Somerset

Emerging markets    
NEW Threadneedle Global Emerging Markets Equity NEW MI Somerset Emerging Markets Dividend Growth NEW Newton Emerging Income Institutional
NEW St. James's Place Global Emerging Markets NEW Janus Henderson Emerging Markets Opportunities  

Somerset Emerging Markets Dividend Growth was among five emerging markets funds to make their entry into Bestinvest’s list.

The sector was absent from last summer’s report, with all emerging market funds having delivered sufficient returns to avoid ‘dog’ status.

But that has changed this time around, with Edward Lam’s £1 billion fund among the entrants after the fund’s position in Turkish stocks was hit by the country’s currency crisis last year.

However, as one of the funds also on the stockbroker’s buy list, BestInvest continues to back the Somerset fund in the belief that it can deliver for investors over the long-term. It has returned £31 to investors over three years on an investment of £100.

Lam has said the portfolio is positioned to perform well in the event of Chinese financial crisis but would suffer from the implementation of further Russian sanctions.

Next: prize pet Artemis makes appearance

Prize pet Artemis makes appearance

UBS Global Enhanced Equity Income NEW Standard Life Global Equity Unconstrained Neptune Global Income NEW Scottish Mutual International Growth
Standard Life Global Equity Income NEW Artemis Global Income Royal Bank Of Scotland International Growth NEW Templeton Growth
NEW Threadneedle Global Equity Income NEW St. James's Place UK & International Income NEW BlackRock Global Equity NEW JPM Global Unconstrained Equity
Janus Henderson Global Equity Income Legg Mason IF Martin Currie Global Equity Income NEW BlackRock Global Income NEW St. James's Place Global Equity Income
Jupiter Merlin Worldwide Portfolio NEW Scottish Widows Opportunities Portfolio NEW Schroder MM International Jupiter Global Equity Income

Escaped: Lazard Global Equity Income, Aberdeen World Equity Income, Scottish Widows Global Select Growth, St. James's Place Ethical, Liontrust Global Income, Aberdeen World Equity, Janus Henderson World Select, Jupiter Global Managed, Quilter Investors Ethical, LF Canlife Global Equity Income, FP CRUX Global, LF Canlife Global Equity

Artemis Global Income, the £3.9 billion fund managed by Jacob de Tusch-Lec, is another BestInvest buy list fund to also appear on its dog list.

Value investor de Tusch-Lec’s bias towards small and medium-sized companies meant the fund was out of step with the wider market in 2018, Bestinvest highlighted in its report.

The fund lost 13% last year, as the manager’s positioning in cyclical stocks highly sensitive to the economic outlook came unstuck. 

De Tusch-Lec said in an update to investors that there was ‘nowhere to hide’ at the end of the year and ‘our fund didn’t fare well’ due to struggling cyclical stocks, particularly energy companies.

The fund also features in buy lists from Bestinvest rivals Hargreaves Lansdown and Intercative Investor.

Two global Aberdeen funds managed to escape the list, Aberdeen World Equity Income and Aberdeen World Equity.