Influential annual Spot the Dog survey results are in! BestInvest name and shame the latest underperforming dog funds

by | Feb 12, 2022

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‘In recent years, it has been tougher for investors to identify weak funds, with low interest rates and central bank money-printing programmes pushing share prices higher. Most funds investing in equities have generated gains irrespective of the skill of their managers. This rising tide has helped to disguise some bad decisions from fund managers who have earned handsome fees in the process.

‘As economies have reopened from the COVID-19 lockdowns and bounced back, inflation has also reared its head, forcing the hands of central banks to raise borrowing costs.  There is a whole generation of investors who have never experienced the current levels of inflation before and this will be followed by much higher interest rates too. This seismic shift is starting to challenge the long-term dominance of growth sectors like tech where valuations had become quite bloated, and markets are starting to reassess under-rated “value” areas such as banks and other financial shares. At the margins, this may push quite a few funds in or out of the doghouse over the coming year.

‘The UK has been an unloved market for the last few years, but in the calendar year 2021, the top fund rose 39.4%, while the worst eked out a meagre 0.5%. This highlights the need to be super selective when choosing a fund manager to look after your savings and, once invested, how important it is to continue to regularly monitor your investments and check whether they are delivering value for money.’

‘While many people are enthusiastic about selecting and reviewing their investments from the thousands of options available on services like Bestinvest, others find they have neither the time or inclination to do so. For these investors, it might time to swap their litter of investments for a ready-made portfolio instead. These provide a ‘one-stop shop’ approach, where you will get accessed to a portfolio of funds, blended to suit a risk portfolio which is then regularly review and rebalanced on your behalf [2].

 

[1] How a fund becomes a Dog

We only look at the fund universe of open-ended funds (unit trusts or OEICs), and only those available to UK retail investors.

To make the list a fund must first have failed to beat its benchmark over three consecutive 12-month periods, to highlight consistent underperformance. Second, the fund must have underperformed the benchmark by 5% or more over the entire three-year period of analysis – which in this case ends on 31/12/2022.

 

[2] Ready-made portfolios
Alongside providing investors with access to thousands of funds, Exchange Traded Funds, investment trust and shares to choose from, Bestinvest also offers a selection of ready-made portfolios designed to suit different investor risk profiles. It’s new Smart range of five low-cost ready-made portfolios each invest across a diverse selection of passive investments funds, giving investors exposure to a wide range of markets and asset classes – including equities, bonds and gold – at very low cost and without relying on the stock picking skills of fund managers. The Smart funds ongoing annual charges are between 0.34% and 0.37% and investors pay a highly competitive Bestinvest account fee of 0.20% – whether in an ISA, SIPP, Junior ISA or General account, meaning total costs are around a third less than most “robo-advisers” and a considerably less than the fees on the actively managed funds that appear in Spot the Dog.

 

The Biggest Beasts in Spot the Dog by Fund Size

The Most Significant Underperformers in Spot the Dog versus the Market

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