Spot the Dog January 2016

Tail between the legs for fund giant Aberdeen

• Controversial report names and shames investment funds that have underperformed for three consecutive years on the trot and by more than 10% over three years
• Number of serial underperforming funds increases to 54, up from 37 funds six months ago
• The level of assets in the underperforming funds rises slightly to £18bn, from £17.6bn in our last report
• The area with the largest number of dog funds remains Global with 18 funds representing 14% of the universe
• The area with the highest manager failure rate is North America, as it has 10 dog funds representing 18% of the universe
• Fund giant Aberdeen stands out like a puppy with a sore paw, as it manages 11 ‘dog’ funds and in addition is the underlying manager of seven further funds for the likes of Halifax, Scottish Widows, St. James’s Place and the Trade Union Unit Trust
• M&G continues to dominate the dog-house by assets under management (£6.4bn) due to the continued woes of its former flagship Global Basics and Recovery funds which are turning into long-term inmates
• Readers offer: Spot the Dog can be downloaded for free at www.bestinvest.co.uk/dogsor by calling 020 7189 9999 to request a hard copy

Leading UK investment group Tilney Bestinvest has published the latest instalment of its controversial twice-yearly Spot the Dog report, which for two decades has “named and shamed” consistently poor performing investment funds. Investors looking to tuck money into a stock market fund in their ISA or a Self-Invested Personal Pension before the end of the tax year might be wise to get hold of a copy before potentially committing their hard earned cash to a howler.

January 2016’s edition of Spot the Dog, which is based on data up to 31 December 2015, has identified 54 ‘dog’ funds (unit trusts and OEICs) from a number of Investment Association equity sectors - up from 37 funds in the last edition. The level of assets in the funds identified has also risen from £17.6bn in July 2015 to £18bn in this latest report. Each of the funds in the report met the strict criteria applied by Tilney Bestinvest of being available to retail investors and failing to beat their benchmark over three consecutive 12-month periods and by 10% or more over three years. These tough filters ensure the report collars the very “worst of the worst”.

Global and North American funds: the Rottweilers in the kennel

The area with the largest number of dog funds remains the same as it has been over the past 24 months; Global equities, with 18 funds representing 14% of the universe. But the market with the highest ratio of dogs as a proportion of the universe continues to be North America, where 20 dog funds in the kennel represent 18% of the sector universe. The report notes that the record of active fund managers in the US equity market is so dismal, even billionaire investor Warren Buffer has admitted that on his demise the advice he would leave to the trustees of his wife’s assets would be to “invest 90% in a very low cost S&P 500 index fund.”

Aberdeen and M&G: The Great Danes in the Dog House

When ranked by number of funds in the report, the unwanted trophy of ‘Top Dog’ is with acquisitive, listed fund giant Aberdeen Asset Management with 11 of its funds in the table. However, the real picture is even worse as it is also the underlying manager for a further seven other funds. These other funds are those they run for Scottish Widows (three dog funds), Halifax (two), TU Funds Managers (one) and St. James’s Place (one). Indeed all four dog funds in the Europe sector have Aberdeen’s paw prints all over them. It really does beg the question whether they have bitten off more than they can chew?

However the fund house with the largest assets under management within dog funds remains Prudential-owned M&G with £6.4billion. The fund house has held this position for the last three consecutive reports from July 2014. This is due to the continued woes of its former flagship M&G Recovery and M&G Global Basics funds, along with M&G North American Dividend Fund (a repeat offender if taken under its previous guise, the M&G American fund) and the M&G Global Recovery Fund.

Not all Bad News…

On a more positive note, there are some sectors which have relatively few dog funds. In UK Equities (which combines the IA UK All Companies and UK Equity Income sectors) only eight funds out of a universe of 246 were dog-collared. Many UK equity managers have outperformed the FTSE All Share Index in recent years by underweighting, or completely avoiding, the problematic sectors of oil and gas and mining stocks, unlike index trackers that have remained fully exposed. Europe is another area where dogs funds are a rare breed, with only four funds rounded up as mutts out of 97 funds.

While many groups will from time to time have an unruly pup in their fund range, notable absentees amongst larger groups include: AXA, Artemis, Baillie Gifford, Baring, BlackRock, Columbia Threadneedle, First State, Henderson, Invesco Perpetual, JO Hambro CM, JP Morgan, Liontrust, Man GLG, Neptune, Old Mutual, Royal London, and Standard Life Investments.

Jason Hollands, Managing Director at Tilney Bestinvest commented: “Spot the Dog is a reminder that not all investments turn out to be a resounding success - to put it politely - and a few can turn out to be disastrous. It is imperative to keep a close eye on your portfolio, periodically giving your investments a review. Do not assume that going with a big brand fund group is any guarantee of healthy returns – it isn’t. Even funds that were once very successful and popular with professional advisers can go off seriously off the boil.”

“It is important to stress that this is not a ‘Sell’ list but if you own a fund in it, you should certainly investigate whether to persevere or switch elsewhere. There are many reasons why funds go through periods of poor performance, some of which the fund house may already be addressing. For example there could be a new fund manager in place or a change of investment approach. In other cases a particular style, such as ‘value’ investing, may have been temporarily out of vogue with the prevailing market climate. But if there is nothing to convince you that prospects are improving, don’t let inertia get the better of you and consider a switch to a fund of better pedigree. These days fund switches can usually be executed very easily and inexpensively online.”

Readers offer: Members of the public can get a free copy of the of Spot the Dog by downloading it from www.bestinvest.co.uk/dogs or calling 020 7189 9999. For a case study of an investor who has switched out of a ‘dog’ fund please contact Matthew.Gray@tilneybestinvest.co.uk

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Spot the Dog is on Twitter! Follow him @Spot_theDog

Important Information:

Please note Spot the Dog is intended purely as a representation of statistical data.

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. This press release does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact one of our advisers.

Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing.

Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change.

Press contacts:

Gillian Kyle
0203 818 6846 / 07989 650604
gillian.kyle@tilneybestinvest.co.uk

Matthew Gray
0207 189 2492
matthew.gray@tilneybestinvest.co.uk

About Tilney Bestinvest

Tilney Bestinvest is a leading investment and financial planning firm that builds on a heritage of more than 150 years. We look after more than £9 billion of assets on our clients’ behalf and pride ourselves on offering the very highest levels of professional client service with transparent, competitive pricing across our entire range of solutions.

We offer a range of services for clients whether they would like to have their investments managed by us, require the support of a highly qualified adviser, prefer to make their own investment decisions or want to take more than one approach. We also have a nationwide team of expert financial planners to help clients with all aspects of financial planning, including retirement planning.

We have won numerous awards including Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. We are pleased that our greatest source of new business is personal referrals from existing clients.

Headquartered in Mayfair, London, Tilney Bestinvest employs over 400 staff across our network of offices, giving us full UK coverage, and we combine our award-winning research and expertise to provide a personalised service to clients whatever their investment needs.

The Tilney Bestinvest Group of Companies comprises the firms Bestinvest (Brokers) Ltd (Reg. No. 2830297), Tilney Investment Management (Reg. No. 02010520), Bestinvest (Consultants) Ltd (Reg. No. 1550116) and HW Financial Services Ltd (Reg. No. 02030706) all of which are authorised and regulated by the Financial Conduct Authority. Registered office: 6 Chesterfield Gardens, Mayfair, W1J 5BQ.

For further information, please visit: www.tilneybestinvest.co.uk