By GRAHAM FROST 20/07/2007
It’s Spot the Dog time once again, as we name and shame the poorest investment funds of the last three years.
The latest edition of our Spot the Dog guide sees the number of Dogs rise for the third consecutive edition, with funds in the doghouse nearly doubling over the last 18 months.
This time around there are 72 Dogs totalling £12.6 billion, versus 60 in January 2007 (£10 billion) and 38 (£3.3 billion) in January 2006. Higher stock market volatility is the likely cause, as this tends to widen the gulf between the best and worst funds, meaning more underachieving funds fall foul of our demanding dog criteria (a fund must have under-performed its benchmark in each of the last three years and also have under-performed its benchmark by at least 10% over that period).
The worst offending fund groups (by value) are:
AXA (£1.25 billion) – Tops the Dog list for the first time thanks to its £1.17 billion UK Equity Income fund. Since acquiring Framlington in 2005 AXA has become a company of two halves: AXA Framlington funds, which are generally good, and AXA funds which are less so. The AXA managers could obviously learn a lesson or two from their Framlington colleagues.
Henderson (£1.11 billion) – Is becoming something of a ‘Dog Row’ stalwart. The £536m UK Growth & Income fund, co-managed by ‘star’ manager Graham Kitchen, suggests that not all of Henderson’s extensive management changes in recent years have delivered as intended.
HSBC (£1.11 billion) – Is another group that appears due to a colossal Dog. The £1.09 billion UK Growth & Income fund has gone markedly downhill since the departure of manager Tim Russell in September 2002. In a last ditch attempt to resuscitate the fund HSBC moved to a multi manager approach in January this year, but performance is still poor.
Schroders (£1.11 billion) – The acclaimed £730m Tokyo fund appears for the first time. This reflects just how rough the Japanese market has been to fund managers in recent years. Less excusable is the appearance of its UK Select Growth fund, a sector in which Schroders usually excels.
Canlife (£990 million) – You could be forgiven for thinking Canlife enjoys living in the doghouse. Despite regular appearances and over half its assets reviewed being dogs, Canlife appears to be making little change to way it runs its funds.
Fidelity (£940 million) – Has had a tough 12 months across the board, but it’s the £803m UK Growth fund that stands out in this edition. Despite having a vast team of investment analysts, Fidelity still can’t beat the FTSE All Share index on its mainstream UK fund.
Even if funds in your portfolio don’t feature in our guide, you should still regularly review their credentials and performance to ensure they are worth holding. Our research suggests that around two thirds of actively managed funds in the IMA UK All Companies and North America sectors fail, on average, to beat their benchmark index over three year periods. This suggests that if you pick a fund in these sectors at random there’s a two in three chance it will under-perform – not very encouraging! We believe thorough investment research can significantly improve the odds of selecting successful funds, which is why we devote a lot of time and resource to this area.