The number of funds named as consistently underperforming compared with their peers in a biannual report has increased by a third, meaning investors are getting lower returns than they could find elsewhere.
Bestinvest’s Spot the Dog report names 119 stock market investment funds, among them 15 major companies with more than £1 billion of investors’ cash each. It was 33% more than the last report, six months ago.
Invesco retained the bottom spot, ranked as Bestinvest’s Top Dog for the sixth time in a row. It was followed by Jupiter, St James’s Place and Schroders.
The 119 funds identified in the report collectively hold around £49.6 billion in customers’ savings.
The funds all delivered a worse return than the markets they invested in during 2020, 2019 and 2018. They also underperformed by at least 5% across the three-year period.
One fund underperformed the market by 42%, Bestinvest said.
“If your savings are tied up in an investment fund that is repeatedly delivering worse returns than the market it invests in, then you really owe it to yourself to take a closer look and think about whether you might be better off moving it elsewhere,” said Bestinvest managing director Jason Hollands.
“The differences between the best and worst performing funds are enormous and so it is essential to choose funds very carefully and then keep a beady eye on them or opt for low-cost trackers instead. The latter won’t beat the returns of market, but will closely mimic them.”
He added that it is not always obvious to savers if their money is in a dog fund as a majority of the funds still made returns. Only 32 of the 119 lost investors’ cash.
“That’s because stock markets in general have delivered very strong returns over the last decade and so nearly all ships have been lifted by the rising tide, even those with leaks in their hulls,” Mr Hollands said.
“If the value of your investments has gone up over the years, it is easy to assume that the fund manager has done an OK job. In reality, their decisions may not be adding any value whatsoever, though you’ll be paying them fees nevertheless.”