SJP joins Invesco in the dog house with £6.9bn of underperforming funds

St James’s Place joins Invesco in the dog house with £6.9bn worth of funds named and shamed in Bestinvest’s latest edition of Spot the Dog which saw a record number of laggards amid the coronavirus crisis.

The twice-yearly report from Bestinvest recorded a “staggering” 65% increase in the number of dog funds, those that have underperformed the market more than 5% after fees over three years, from 91 in February to 150. 

The funds representing the worst of the worst hold £54.4bn worth of savings, up from £43.9bn in the last edition. 

While many of the newcomers to the doghouse were “Chihuahua-sized funds”, with the median fund being only £133m, Bestinvest flagged 18 “Great Dane” funds that had £1bn in assets or more. 

The £3.1bn Invesco High Income fund, formerly run by Mark Barnett, was once again the biggest laggard of the bunch, losing 26% over the period, followed by the £3bn Scottish Widows Multi Manager International Equity fund, which lost 13%. 

Rounding out the top three mutts was the £2.4bn St James’s Place Global Equity fund.  

Source: Bestinvest 

SJP sees number of dog funds nearly triple

Though St James’s Place has been in the dog house previously the number of its funds being named and shamed is on the rise.  

The UK wealth manager was the runner up in Bestinvest’s “Hall of Shame” with eight of its funds, totalling £6.9bn in assets, winding up in the doghouse compared with just three in February. 

SJP hand selects other fund providers to run its segregated mandates, something it claims offers clients “access to fund managers of outstanding ability,” Bestinvest noted.  

Its £1.1bn UK High Income fund remains one of the biggest dog funds on Bestinvest’s list, despite being taken over by new managers Nick Purves, from RWC Partners, and Richard Colwell, from Columbia Threadneedle, after Neil Woodford was booted off. The fund is the second worst performer in the UK All Companies sector, losing 26% over three years, behind the LF ASI Income Focus mandate, which was also previously run by Woodford, down 39%.  

See also: Segregated mandates fail to save SJP and Omnis from Woodford hit

Its £1.3bn Global fund was another large laggard, falling 29%, as was the Adrian Frost-run £560m UK & International Income fund, which was the third worst performer in the Global sector at –37%. 

An SJP spokesperson criticised Bestinvest’s analysis of not making accurate like-for-like comparisons. SJP’s fund performance is shown net of all charges, including ongoing advice and administration, so it is unfair to compare it against others in the list which are not calculated in the same way, they said. 

“Clients invest with St. James’s Place for 14 years on average and typically do so in tailored portfolios comprising 6-10 of our funds,” the spokesperson explained. “Over all rolling five year periods since their inception in 2011, our portfolios have outperformed their relevant benchmarks 80% of the time. At a fund level, there is outperformance over all rolling 10 year periods against their relevant benchmark 84% of the time, on average.”

Invesco retains top dog status

But it was Invesco that had the dishonour of being “top dog” for the fifth time in a row. The Henley-based fund group had the highest number of funds in the doghouse at 13, up from 11 in the previous report, and the most assets at £11.4bn. 

Once again the trio of UK equity funds formerly run by Woodford protégé Barnett were among the fund group’s biggest beasts, accounting for £5bn of its underperforming funds.  

But Bestinvest noted a number of other mutts in its stable, including the Asian and European Equity funds, which both have around £1.5bn in assets, as well as the £1.1bn Global Equity fund. “Pretty much every part of the globe can be accessed through an Invesco pooch,” Bestinvest noted. 

A spokesperson for Invesco stressed the firm had made a number of changes and improvements across its team over the course of the year under the direction of CIO Stephanie Butcher.  

In addition to replacing Barnett on his UK funds and merging his £1.4bn Income and £102.2m Strategic Income funds, Invesco said European Equity manager Jeff Taylor would be retiring at the end of the year and replaced by John Surplice. Taylor’s fund was the fourth worst performer in the Europe sector, losing 21% in three years.  

“This report is only a snapshot over a specific time period, during which much change was taking place,” the spokesperson said. “We are focused on understanding our clients’ ambitions, whilst ensuring consistency in our investment philosophy and process.” 

Fidelity Special Situations becomes shocking entrant to the dog house

There were a number of eyebrow raising funds appearing in the kennel for the first time, including the £2.2bn Fidelity Special Situations fund, which is on Bestinvest’s list of recommended funds. 

The firm notes that manager Alex Wright takes a contrarian approach targeting unloved companies, a style that “has not been in vogue in recent times”. 

“For our part, we continue to back Fidelity Special Situations for this type of approach,” Bestinvest said. “The manager Alex Wright has done fantastically well in the past and since the market lows of March 2020, the fund has performed well.“ 

UK and global income funds slump amid unprecedented slew of dividend cuts

Previous high achievers Jupiter Income, ASI UK Income Unconstrained Equity and the small and mid-cap biased Unicorn UK Income fund also faltered, with the former two landing among the 10 worst UK equity income funds.  

Both global and UK-based income funds saw the highest percentage of dog funds in the report (25% and 26% respectively) thanks to an unprecedented slew of dividend cuts during the Covid crisis. 

“It has been a truly torrid period for such funds, with over £36bn of UK dividends cancelled or cut so far in 2020 as businesses have reacted to the impact and uncertainty of the Covid-19 pandemic,” said Tilney managing director Jason Hollands. “Even oil giant Shell, the world’s biggest dividend generating company, has shaved its interim payouts for the first time since the Second World War.  

“This gruelling environment for dividends has sent the number of UK equity income funds in Spot the Dog skyrocketing from just six last time to 22 in this edition.” 

The lowest proportion of dog funds were found in the UK All Companies and Global Emerging Markets sectors, both of which had just under 11% of their eligible fund universes classified as dog funds. However the number of UK equity mutts jumped from 16 to 29 in the latest report. 

North America and Europe saw a decrease in the number of underperforming funds which fell to 16 and 13 respectively.