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Invesco 'top dog' as Bestinvest collars Barnett funds

Invesco 'top dog' as Bestinvest collars Barnett funds

The number of ‘dog’ funds on Bestinvest’s Spot the Dog list has climbed 123%, with Invesco Perpetual leading the pack.

Bestinvest has once again named and shamed the underperforming funds, identifying 58 dog funds that failed to beat their benchmarks over three years and fallen at least 5% short over the full term.

See which 10 fund groups were the biggest offenders

‘In the previous edition of Spot the Dog we questioned whether ‘dog’ funds were under the threat of extinction as the number of funds in the kennel had dropped to 26, amounting to £6.4 billion of assets, the lowest level we could recall,' said Bestinvest managing director Jason Hollands.

'We welcomed this turn and hoped this would prove a sustainable trend rather than a mere blip but six months on it appears that the Lassies of the investment world have come home.'

Invesco Perpetual previously had no funds featured, but has rapidly leapt to ‘top dog’ position. The asset manager's five funds in the list include its flagship Invesco Perpetual High Income and Income funds, run by Mark Barnett.

Altogether the named Invesco mandates run a total £15.1 billion in client funds, or 45% of the total assets included in the list, at an overall £33.6 billion.

Commenting on the report, Invesco Perpetual chief investment officer Nick Mustoe said the EU referendum result had been major factor adversely impacting the firm's UK equity funds.

'The strategies managed by Mark Barnett are weighted toward stocks that generate income from UK sourced revenues (rather than foreign income generators), an approach that has lost favour in  a climate of political and economic uncertainty.

'We estimate that the valuation across global equity markets  of  each £1 of revenue sourced in the UK has declined by some 30% since June 2016 as investors have lost confidence in the prospects for cash generation by companies primarily exposed to the UK economy.

He added: 'We believe that  the negative market reaction has been excessive - and in many cases indiscriminate - and that there are now significant opportunities for selective investment in a number of high quality, cash generative UK companies that will deliver superior shareholder return in the medium to long term.'

Barnett’s predecessor Neil Woodford's St James’s Place UK High Income fund is also featured in the list after having ‘endured a torrid period of performance over the last couple of years’.

In terms of sector split, global funds have the highest number featured, with 19. At the other end, global emerging market dog funds 'seem to have become extinct with no dog funds to be found'.

The research noted: 'Almost half of these [global funds] have income generation as part of their objectives and that may help explain their relatively poor performance, as the greatest returns in recent years from global equity markets have come from ‘growth’ stocks in areas like technology and new media, where dividends are not a notable feature.'

With Invesco taking top spot, Aberdeen Standard Investments has been pushed down. Still there are five funds run by the firm on the list, with two others, such as the SJP Ethical fund, where it was the underlying fund manager in the period. 

Meanwhile, Janus Henderson has taken third place with its European Selected Opportunities and World Select funds

Hollands added: 'In reality there are numerous reasons why a fund might hit a period of relative underperformance and so it is important to delve deeper before deciding to switch and move your cash elsewhere.

'In some cases, bad decision making is at fault, and the case to move on makes sense but in others a previously sound investment process or an agreed mandate may be out of favourwith recent market trends, in which case some patience is required.'

The data analysed is up to 30 June 2018.

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Neil Woodford
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