Bestinvest: The Worst Performing Investment Funds

It’s a race to the bottom on the UK advisory’s controversial list, which ranks funds by underperformance over the last three years.

(January 29, 2013) — One bad year won’t land a manager on Bestinvest’s list of “dog” funds—but three years might. 

The London-based advisory has published the 2013 edition of Spot the Dog, or, as Bestinvest refers to it, “the guide fund managers would love to ban.” The firm only analyzes funds open to retail investors—hedge fund managers, you can relax now—and divides funds by the regions and the types of stocks they invest in. Each category (UK Equity Income, Global Emerging, North American etc.) has its own benchmark, which funds have to underperform by at least 10% three years running to qualify as “dogs.” 

For those uncomfortably familiar with some of the funds below from their own portfolios, Bestinvest stresses that “Spot the Dog is not a sell list,” nor does it project future earnings. But they say investors should take a hard look at the dogs in their portfolios for indications that performance may pick up. 

“Some funds have distinctive styles or investment approaches that can go through periods that are deeply out of step with the current markets, but could be about to come back into favor,” the report points out. “Some managers are better suited to tougher times, others to rising markets.” Or, the report notes, action may be already underway to improve performance. “For example if a new fund manager with a strong, proven track record elsewhere is appointed” or a new investment approach has been “applied to a fund that has historically underperformed, performance could be turned around.” 

The fortunes of investment funds do vary significantly from year to year, both for better and the worse. Last year, Edinburgh-based management firm Baillie Gifford had no mention in Spot the Dog. This year, three of the company’s funds made the lists, and Bestinvest compares one of its small and struggling portfolios to a Shih Tzu. 

Scottish Widows and its investment partnership arm once again took the top spot among management companies, with four funds qualifying for the list. BlackRock has the same number, but they manage much less investor capital. Of course, large asset managers with many funds are more likely to have dogs in the show. However, the report notes that several of the largest firms with broad fund ranges have no representatives on the list, including JP Morgan, BNY Mellon Asset Management, M&G Investments, AXA Investment Managers, and St James Place. 

The top spot on the lists goes the worst performer in each category, with returns improving as you move down.


The Bottom Five: UK General Funds 

 1. Standard Life UK Opportunities 

 2. Legal & General Growth 

 3. SWIP UK Opportunities 

 4. Blackrock UK Dynamic 

 5. Legal & General UK Active Opportunities 

 Top performer in the category: Liontrust Special Situations 


The Bottom Five: North American Funds

 1. Investec American 

 2. Legg Mason US Equity 

 3. Blackrock US Opportunities 

 4. Kames American Equity 

 5. Neptune US Opportunities 

 Top performer in the category: JPM US

The Bottom Five: Global Emerging Markets Funds 

 1. IM Hexam Global Emerging Markets 

 2. Templeton Global Emerging Markets 

 3. Baillie Gifford Emerging Markets Leading Companies 

 4. Baring Emerging Markets 

 5. Baillie Gifford Emerging Markets Growth 

 Top performer in the category: First State Global Emerging Markets Leaders


The Bottom Ten: Global Funds 

 1. Allianz Global Ecotrends 

 2. IM WHEB Sustainability 

 3. Schroder Global Climate Change 

 4. Scottish Mutual International Growth 

 5. Premier Global Strategic Growth 

 6. Kames Global Equity 

 7. UBS Global Optimal 

 8. Jupiter Ecology 

 9. Premier Global Alpha Growth 

 10. Henderson Global Care Growth 

 Top performer in the category: Aberdeen World Equity