Spot the Dog 2021 (Worst Fund Guide) Just Dropped
A word to the wise before reading the report
Each year BestInvest publish their ‘Spot the Dog’ report that reveals the worst performing funds in the industry (UK). It’s a good read but feels like a marketing exercise and should be taken with a pinch of salt. If you are holding any of these funds don’t panic. Speak to your adviser or look out for the investment managers retort before making a decision.
The report fires shots at HBOS, Invesco, St. James’s Place, Scottish Widows and abrdn (use to be Aberdeen Standard) for poor performance. These are all big firms with £billions under management.
How Does it Work?
The report identifies funds that underperformed a benchmark index over 3 consecutive 12 month periods.
The funds must also have underperformed the benchmark index by 10% or more over the whole 3-year period.
Looking at the report it appears that the funds are categorised based on their Investment Association (IA) sector. This is probably the only way to do it but you still need to be cautious. Let’s look at the UK All companies sector membership qualifications below:
80% of assets in UK equities is certainly a broad criterion. At The Wealth Gap we have had the pleasure of ranking funds professionally in the past. When looking purely at performance the fund manager objectives can bite you in the arse. Some of the funds in UK All Companies will have different objectives. Examples below:
Some funds may be managed to outperform during tough market conditions
Some funds may be managed to minimise volatility
Some funds may be small and have the flexibility to take meaningful positions in smaller companies
Some funds might be huge behemoths and can’t take meaningful positions in smaller companies
Some funds might be highly concentrated in a small selection of companies while others are mandated to diversify their holdings as much as possible
Some funds might have had a great 3 years under a manager that is no longer there
The markets may have changed so that a current managers investment style isnt as effective
It goes on and on and on. Pointing out the worst performing funds in the past is easy but correctly pointing to funds that will perform well in the future… that’s a talent.
In Summary
Spot the Dog is a good read and makes us ask questions about the funds we hold, rather than just sitting back and ignoring the whole thing.
You can download the report here
Until Next Time
The Wealth Gap Team