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Woodford in dog house as underperforming assets rocket 753%

The number of straggling strategies featured in Bestinvest’s biannual ‘Spot the Dog’ report has nearly doubled.

Woodford in dog house as underperforming assets rocket 753%

The number of straggling strategies featured in Bestinvest’s biannual ‘Spot the Dog’ report has nearly doubled, as UK equity funds got bitten over the last six months.

The study found 111 ‘dog funds’ that underperformed their benchmarks by more than 5% for the three consecutive years up to 31 December – including Neil Woodford’s flagship income mandate, which has joined the pack for the first time.

This was up 91% from 58 dog funds listed in August, with the amount of assets held in such vehicles rising 62.5% from £33.6 billion to a record £54.6 billion.

Year-on-year, the sum of assets in dog funds increased 753% from just £6.4 billion held in 26 such funds last February.

Bestinvest managing director Jason Hollands said: ‘Up until 2018 investors have enjoyed several years of rising stock markets. In this environment, even those funds that have done a relatively poor job and not kept pace with general rises in markets have mostly still delivered positive returns.

‘However, things have changed recently, with 2018 seeing losses posted across global stock markets. 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.’

As the firm with the most assets in dog funds, Invesco kept the uncoveted title of ‘top dog’ for the second edition in a row.

The company had £13 billion of assets spread across seven dog funds, including Mark Barnett’s £7.8 billion Invesco High Income and £3.3 billion Income funds.

Woodford Investment Management came second place thanks to the entrance of the £4.9 billion Woodford Equity Income fund, which entered the group of underperformers alongside another 58 UK equity funds worth a combined £30.9 billion.

Bestinvest said: ‘Woodford took a contrarian, more optimistic view of the UK economy after the Brexit referendum, increasing his exposure to domestically focused companies.

‘These companies have been out of favour with investors in recent years, and the fund has also been hurt by a number of stock-specific blow ups and sizeable outflows from investors.

‘The fund now has a substantial exposure to small, illiquid companies and holds just three of the 100 biggest UK companies.’

According to the study, the fund had a three-year return of -28% relative to its benchmark and lost £13 for each £100 invested.

With £4 billion in six dog funds, Columbia Threadneedle came third place in the ranking, as the £1.9 billion Threadneedle UK and £1 billion Threadneedle European funds joined the list.

In total, 14 mandates each holding more than £1 billion were included in the report, including the Artemis Global Income, Janus Henderson European Selected Opps I, and St. James’s Place UK High Income funds.

The 20 biggest dog funds:

  Fund Size (£ bn) Sector 3 year under-perform*
1 Invesco High Income (UK) Z 7.85 UK All Companies -0.19
2 LF Woodford Equity Income C 4.98 UK All Companies -0.28
3 Artemis Global Income I 3.9 Global Equity Inc. -0.16
4 Invesco Income (UK) Z 3.44 UK All Companies -0.19
5 Threadneedle UK Z 2.04 UK All Companies -0.07
6 Janus Henderson European Selected Opps I 1.93 Europe ex UK -0.07
7 St. James's Place UK High Income L 1.68 UK Equity Income -0.3
8 HL Multi-Manager Income & Growth A 1.26 UK Equity Income -0.11
9 M&G Dividend I 1.15 UK Equity Income -0.15
10 St. James's Place Global Equity Income L 1.06 Global Equity Inc. -0.09
11 Jupiter UK Growth I 1.06 UK All Companies -0.28
12 Threadneedle European Z 1.05 Europe ex UK -0.1
13 MI Somerset Emerging Markets Dividend Grth A 1.02 Global Emerging Mkts -0.14
14 Invesco UK Growth (UK) Z 1 UK All Companies -0.07
15 Aviva Investors UK Equity Income 2 0.92 UK Equity Income -0.08
16 HSBC UK Growth & Income C 0.89 UK All Companies -0.13
17 St James's Place UK & International Income L 0.86 Global Equity Inc. -0.11
18 Standard Life European Equity Income P1 0.84 Europe ex UK -0.09
19 Janus Henderson Global Equity Income I 0.78 Global Equity Inc. -0.1
20 Schroder UK Alpha Plus Z 0.76 UK All Companies -0.08

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Mark Barnett
Mark Barnett Average Total Return:
90/91 in Equity - UK Equity Income (Performance over 3 years)
Neil Woodford
Neil Woodford Average Total Return:
91/91 in Equity - UK Equity Income (Performance over 3 years)

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