£95.3bn underperforming ‘dog’ fund assets leap 106%

Fundsmith Equity and Lindsell Train UK Equity among the funds named in Bestinvest’s latest Spot the Dog report

Close up of a Dalmatian dog


A total of 151 equity funds have been highlighted for underperformance in Bestinvest’s latest ‘Spot the Dog‘ report, up 170% from the 56 named in August.

The funds named on the list manage £95.3bn assets altogether, up by 106% from £46.2bn in August. The funds named include Terry Smith’s £23.4bn Fundsmith Equity and the £3.9bn WS Lindsell Train UK Equity fund run by Nick train.

The biannual report highlights the funds that have underperformed their relevant index by 5% or more over three consecutive 12-month periods.

Global equities featured prominently with 49 funds featured in the report, more than double the 24 highlighted in the previous edition.

See also: China funds top performance in February with average 9% returns

UK funds in the ‘doghouse’ also rose sharply, up to 34 from only five in the last report. Bestinvest said this was due to soaring energy and commodity prices during 2021 and 2022 leaving managers who were underexposed to these parts of the market lagging the index.

Jason Hollands, managing director of Bestinvest, said: “Spot the Dog has been highlighting underperforming investment funds for three decades to encourage investors to keep a closer eye on their investments. It is not a ‘sell’ list but a prompt to check on your investments and if any have underperformed recently to understand why and consider their prospects.

“These last three years have been one of the most challenging periods in living memory for fund managers to consistently beat markets, because of sharply divergent performance from different sectors as the world reopened from the pandemic, followed by a war in Europe and, more recently, excitement about artificial intelligence driving extreme market concentration in a small cluster of mega-sized companies.”

Fundsmith and Lindsell Train join the ‘doghouse’

Fundsmith Equity and Lindsell Train UK Equity were two of the largest funds named on the list, alongside SJP’s £11bn Global Quality and £6.8bn International Equity funds.

“When two of the most widely held funds are included in the list, run by respected managers, it is important to explore why this may have happened,” said Bestinvest’s Hollands.

“Terry Smith, the manager, targets quality companies that generate high returns on capital and aims to hold them for the long term. The manager has always been clear that he does not seek to trade shares on shorter term factors, chase fads nor make big macro-economic bets.

“For example, the fund doesn’t own shares in companies that are highly sensitive to the ups and downs of the economic cycle, and has had no exposure to energy, the best-performing sector over the last three years. Neither is the fund heavily invested in technology companies, with the largest exposure being to consumer staples and healthcare.”

Top 10 biggest funds by size 

  Fund  IA Sector  Size (£bn)  Value of £100 invested after 3 years  3-year under     performance (%)  
1  Fundsmith EquityGlobal  23.4£118-14%
2  SJP Global Quality FundGlobal  11.0£109-23%
3  SJP International EquityGlobal  6.8£112-21%
4  WS Lindsell Train UK EquityUK All Cos3.9£111-19%
5  Fidelity Global Special SituationsGlobal3.1£119-14%
6  Fidelity AsiaAsia Pacific2.6£80-13%
7  JPM Emerging MarketsGlbl Emerg Mkts2.1£76-16%
8  BNY Mellon Long-Term Global Eq.Global1.9£125-8%
9  Janus Henderson Glbl Sustain.EqGlobal  1.8£116-16%
10  Ninety One Global EnvironmentGlobal1.8£99-34%
Source: Spot the Dog, February 2024

Since inception in November 2010, Fundsmith Equity has delivered a total return of 563%, well ahead of the 351% return from the MSCI World Index over the same period, which Hollands says is important to put the more recent ‘lag’ in context.

“Importantly, the philosophy and process of the fund hasn’t changed, and the manager is sticking to an approach that has served investors incredibly well over the longer term. We much prefer fund managers who are clear and consistent in their approach, rather than prone to reacting to shorter term factors.”

However, a Fundsmith spokesperson called into question the methodology behind the report.

They told Portfolio Adviser: “Our main UK competitor’s global fund underperformed ours by 16% over the period chosen by Best Invest but is not rated as a “Dog” which raises an obvious shortcoming of the methodology. We also note that Fundsmith Equity outperformed the average return delivered by funds in the IA global sector over the last three years yet many of funds with worse performance are not rated as ‘dogs’.

“As we have always said, a year is simply the time it takes for the earth to revolve around the sun. We think that investors should judge our returns over the long term, and since inception the fund is up 596% or 15.7% on an annualised basis, net of fees, compared with 11.8% for the benchmark MSCI World.”

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The WS Lindsell Train UK Equity fund is another prominent fund in the latest list,” BestInvest’s Hollands added. “Like Fundsmith, manager Nick Train and the team at Lindsell Train also take a long-term, buy-and-hold approach, backing a highly concentrated portfolio of businesses they regard as exceptional.

“The fund does not seek to position for the latest market trend or near-term economic outlook, the approach is focused on company specific attributes. The manager looks for companies that can generate lots of cash on a consistent basis and which have hard-to-replicate competitive advantages such as strong brands.

“These attributes mean the fund has a strong skew to areas like beverages, personal goods and financial services. It has no exposure to energy, the best performing part of the UK market over the last three years, when oil prices surged as economies reopened following the pandemic and war broke out between Russia and Ukraine.

“While this has hampered relative performance over the last three years, since launch in 2006 the fund has returned 404%, well ahead of the 148% return from the MSCI UK Index.”

In terms of overall performance, the Baillie Gifford Global Discovery was the largest underperformer, alongside, SVS Aubrey Global Conviction, Axa ACT People & Planet Equity, FTF Martin Currie Japan Equity and the Aegon Sustainable Equity fund.