St James’s Place (SJP) topped Bestinvest’s list of underperforming fund managers as global strategies suffered in the latest ‘Spot the Dog’ report.
The biannual report, which highlights funds that have lagged their benchmark by at least 5% over three consecutive 12-month periods, identified four SJP funds of over £1bn assets among the top five underperformers by size.
While the wealth manager accounted for 63% of the £46.2bn total assets named in the report, Bestinvest noted that the firm has looked to improve performance on its three global funds recently, including the mammoth £11.5bn SJP Global Quality fund, by shifting positioning in July last year.
Tom Beal, director of investments at St. James’s Place, told Portfolio Adviser: “It’s important to note that the performance of these funds is inclusive of our single ongoing charge which includes the cost for the external fund manager, administration and advice.
“We continually monitor, review, and update our investment proposition to make sure we’re delivering the right outcomes for our clients. In the past two years four of the funds mentioned have undergone a change in manager and performance benefits of these changes will take time to filter through.”
Other major fund groups with “disobedient pups” included Artemis with underperforming assets worth £2.7bn, Scottish Widows with two funds worth £2.1bn included, and Columbia Threadneedle, with four funds featured worth £1.9bn.
Top 10 underperformers by size
| Fund | IA Sector | Size (£bn) | Value of £100 invested after three years | Three-year underperformance (%) | |
| 1 | St. James’s Place Global Quality | Global | 11.47 | 114 | -24 |
| 2 | St. James’s Place Global Growth | Global | 7.49 | 109 | -28 |
| 3 | St. James’s Place International Equity | Global | 7.09 | 101 | -36 |
| 4 | St. James’s Place Growth European Progress | Europe Excluding UK | 1.85 | 113 | -17 |
| 5 | Scottish Widows UK Growth | UK All Companies | 1.82 | 120 | -14 |
| 6 | Artemis US Select | North America | 1.53 | 125 | -17 |
| 7 | Columbia Threadneedle Responsible Global Equity | Global | 1.41 | 120 | -17 |
| 8 | abrdn UK Smaller Companies | UK Smaller Companies | 1.11 | 90 | -18 |
| 9 | Troy Asset Management Trojan Income | UK All Companies | 1.00 | 105 | -29 |
| 10 | St. James’s Global Emerging Market | Global Emerging Markets | 0.87 | 85 | -20 |
Source: Spot the Dog, August 2023
The report said: “If there is a theme across the companies and strategies that have struggled, it is a quality bias. This has been a tough area of the market over the past three years, having fallen between the cracks of the various rotations between growth and value.”
Overall, Bestinvest singled out 56 equity funds for consistent underperformance in its latest report, marking a sizeable increase from 44 in February and 31 in August 2022.
The net asset value (NAV) of the funds in the proverbial ‘doghouse’ has leaped 142% to £46.2bn, from February’s £19.1bn.
Global funds suffered the most with 24 funds pulled up on their performance, representing 15%, or £32.1bn, of assets in the overall sector.
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Despite the sector enjoying a better start to 2023 than expected, the report highlights that gains have been centred on a familiar group of mega-cap names benefiting from the soaring artificial intelligence trend, rather than a wider resurgence among global equities.
Bestinvest said many global managers appear to have been “wrong-footed” by the turbulence in the sector over the past few years.
The single largest underperforming strategy was Baillie Gifford’s £780m Global Discovery Fund, which focuses on smaller companies, trailing the sector average by 70% over the three rolling 12-month periods.
According to data from FE Fundinfo, the fund has returned 106.7% over the last 10 years, compared to the IA Global average of 135.9%.
Jason Hollands, managing director of Bestinvest, said the purpose of the report is to encourage investors to keep a closer eye on their investments by checking performance and assessing if action is required and when.
He said: “The fund management industry has become increasingly competitive over the past couple of decades with more players in the market and fund managers needing to perform exceedingly well just to be average.
“For investors choosing to invest in actively managed funds, finding managers with the skill to deliver superior returns is vital if they are to justify paying the fees to be invested in those funds.”
Improvers
After featuring heavily in February’s report, Bestinvest praised Schroders for turning around performance on the funds it manages for Scottish Widows and HBOS.
Elsewhere, no Invesco strategies featured after recent struggles among its UK equities offerings. Bestinvest noted it had appears to have “finally turned a corner” with its home market franchise.
Hollands added: “With many fund managers failing to achieve this over the long term, Spot the Dog identifies the funds that require special attention because they have consistently performed particularly badly against their benchmark.
“Of course, every fund manager will go through weaker periods – whether that is a run of bad luck, or they are sticking to a style or process that may be temporarily out of fashion.
“Identifying whether these are short-term or structural factors is key and investors should ask some questions before deciding to stick with a fund or switch. Things to consider include whether a fund has become too big, which might constrain its agility, or if there have been subtle but important changes in the management team.
“Also, is the manager straying from a previously successful approach or are they now too burdened with additional responsibilities?”
