Don't get bitten by the dogs

Ever wondered how poorly some funds perform, and whether you're exposed to them?

How TPP can help you find what you’re looking for.

Do you know what you are currently invested in? Did you have money with Woodford, or Madoff? Would you even know if you had money with the next failed fund until it happens?
Or do you, like so many, simply get a report every quarter saying you have some in Invesco, Jupiter, JP Morgan and Fidelity etc.? Do you know who actually runs these funds and what they in turn are investing in? I would say the answer to this last question is an emphatic, no.
Investment funds are failing investors more than ever before, according to a report published by analyst Bestinvest.
The fund scrutineer, part of wealth manager Tilney, says an 'incredible' 150 investment funds, one in six of all funds scrutinised, have consistently underperformed markets over the past three years.
This, it says, represents a staggering 65 per cent increase on the number of underachievers identified six months ago – and is a record since Bestinvest first started issuing its 'spot the dog' report on poor fund performance 25 years ago.
Between them, the 150 funds manage investors' assets of more than £54billion. Over the three-year period scrutinised, some of them have registered frightening losses in excess of 30 per cent.

Mixed up in this list is a fund run by a man named Neil Woodford, but of course, there’s no way of knowing this just by looking at the name of the Group’s fund. This is how you would see your investment assets in your portfolio report from your Wealth Manager. The names, are meaningless, the returns and the quality of actual assets they hold are all that matter.

With regards to the list of ‘Dog’ funds above, we have to be aware of a little ‘pot calling the kettle black’ here, as Tilney themselves have their own underperforming funds.
Their reports also state absolutely nothing about where their money is invested other than ‘Invesco’, ‘Fidelity’, ‘Liontrust’ etc. Yes, even though these firms feature heavily in their own naming and shaming list, they still put the largest share of their ‘Adventurous Portfolio’ with Liontrust, and a significant amount with Invesco.

We also discovered that most of their own ‘funds’ (actually really a collection of other funds), lost between -3% to -6% in 2018. Add this to the very little made last year, in fact roughly increasing by the same amount lost in 2018 so close to net 0% on the two years. This is pretty poor, but it’s still the industry average in underperforming years, so everyone seems quite happy with it, including Tilney themselves.

On a wider scale, over the last 12 years, the Tilney ‘Adventurous portfolio’ has made an annualised return of 8.1%. This is pretty much, exactly average.

Incidentally, would it also surprise you to know that this particular portfolio, ‘Adventurous’, holds 5% of the capital in ‘cash’? It did us.

In the UK, we don’t want much more than that though; average will do us just fine. The reason they release the name and shame list, is because there will always be worse than them, and their funds will maintain the middle ground thus, avoiding any scrutiny.

Sadly, these days, staying out of the light, and being ‘average’ is all IFA’s and Investment Managers are looking for. If they can be average and still manage £24bn in assets, they are happy. This also keeps the FCA happy; it makes for peaceful regulation. Don’t aim too high, don’t fail too big.

The report into the worst performing funds, also made a list of the largest capital managed by underperformers. To make it onto this list, a fund must have failed to beat its benchmark for three 12-month periods running and underperformed by five per cent or more over the entire three years. This essentially means, they make practically nothing.

Here are the winners of that competition:

All data is sourced from Morningstar Direct and is accurate as at the end of December 2020


Do any of the names above look familiar? They certainly should do. These are some of the biggest names in the investment world, and they run funds which are massively underperforming. The total amount from the top ten above is £37,800,000,000.

There is a very good chance you have money in one or more of them and you don’t even know it.

They are well known, so we all trust them to do a good job with our money. Most of us don’t pay too much attention to it; we’re all comfortable knowing that our IFA or Investment Manager knows what they’re doing and they’ve got our back.

If the markets have a bad year, they will simply say so, and you lost money. It’s not their fault, it was the markets.

If you are happy with the status quo, then average may well be for you. If you are not, see what TPP can offer.

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