It’s fair to say that Bestinvest’s ‘Spot the Dog’ list is not popular with fund management groups. Many quibble over its time frame, its analytics, and the widespread publicity it receives. Large firms with lots of funds always tend to feature.
- This year’s ‘Spot the Dog’ saw global funds struggle
- In contrast, the UK Smaller Companies and Global Emerging Markets sectors had no funds on the list
- The overall assets in underperforming funds are falling
The ‘Spot the Dog’ list highlights those trusts that have underperformed their benchmarks for three consecutive years and by more than 5% over a three-year period. It can reflect cyclical issues in markets – this year, for example those funds with commodities exposure did particularly badly.
There were other conclusions: The first is that it’s tough to be a global investor – there were 17 dog funds sitting in this category. This is almost certainly attributable to the strong performance of the US market over the period. Managers who were underweight the US, usually on valuation grounds, underperformed.
“Investors may believe they are simply sticking with a fund having a rough patch, only to find that it was a ‘Dog’ after all.”
There were sectors with no funds on the list: the UK Smaller Companies and Global Emerging Markets sectors had no ‘dogs’. Equally, there was only one fund each from the Japan and UK Equity sectors. Equally, the overall message was a positive one: total assets in ‘Dog’ funds declined from £8.6bn in February to £7.6bn. The median fund size was just £114m, suggesting that investors are becoming more savvy at navigating ‘dog’ funds.
Credit should also go to those fund groups with no funds on the list: Aviva, Artemis, Baillie Gifford, Barings, BlackRock, BMO Global (previously F&C), Invesco Perpetual, JO Hambro, Kames Capital, Liontrust, Man GLG, Old Mutual and Royal London.
However, the whole concept of lists such as this one highlights a problem with fund management. If we are to be long-term, it takes a long time for poor performance to be found out. Investors may believe they are simply sticking with a fund having a rough patch, only to find that it was a ‘Dog’ after all.
As ever, it shows the need not simply to highlight underperformance, but to understand fully the reasons for that underperformance.