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Aberdeen and St James's Place top 'dog' fund list

Aberdeen and St James's Place top 'dog' fund list

by Daniel Grote Jul 31, 2017 at 14:37

Aberdeen Asset Management has topped online stockbroker Bestinvest's Spot the Dog study of underperforming funds, with more than £2 billion of its funds branded poor performers.

The chief culprit is the £1.3 billion Aberdeen Asia Pacific Equity fund, the largest 'dog' fund in the study, the moniker handed to funds that have underperformed their benchmark over three consecutive 12-month periods, and by 5% or more over three years.

The re-entry of Aberdeen's big Asia fund into the list has seen its 'dog' assets swell from £682 million six months ago, the time of the last report, to £2 billion, more than any other UK fund group.

'In recent years Aberdeen Asset Management has been one of the most prominent groups in the doghouse, but in the last edition we noted a steady decline in the number of funds and assets,' said Bestinvest in its report.

'It is therefore dispiriting to see Aberdeen return to the top of the half of shame once again with both an increase in the number of funds and a rise in assets to more than £2 billion.'

The fund, run by Aberdeen's Asian equities team, returned 38% over the three years to the end of June, lagging the benchmark, the MSCI Asia Pacific ex-Japan index, by 7% over that period.

Much of that underperformance was due to a difficult 2015 for the fund, which lost 9.8%, more than double the fall of the benchmark. Since the turn of the year, the fund has been outperforming the benchmark, up 14.4% versus a 13.8% return from the index.

The fund was one of five from the Aberdeen stable to be labelled a dog. Also on the list are the smaller Aberdeen Asia Pacific & Japan Equity , World Equity World Equity Income and European Smaller Companies Equity funds.

Second on the 'dog' list, running £1.7 billion in underperforming funds, was national financial advice group St James's Place, which offers its own funds with management contracted out to investment groups.

The £1 billion St James's Place Equity Income , run by Nick Purves at RWC Partners, was the only UK equity 'dog' fund, having delivered just 13% over three years, 8% behind the benchmark.

'Purves's investment style focuses on identifying companies he believes are undervalued but this has been sharply out of favour with markets which have favoured quality growth companies in recent years,' said Bestinvest in its report, also taking aim at its high annual charges of 1.61%.

The roster of UK 'dog' funds is down from six at the start of the year, and is now at its lowest level since the stock broker first started compiling the report two decades ago.

Assets in underperforming funds overall have fallen to £7.6 billion, down from £8.6 billion at the start of the year and around £18 billion a year ago.

'The overall drop in funds hitting our exacting criteria is... encouraging but it remains to be seen whether this is a technical blip or a sign of a more meaningful trend coming through,' said Bestinvest managing director Jason Hollands.

He said the strong rally of cyclical stocks in the second half of last year, accelerated by the shock election of Donald Trump as US president, as investors anticipated rising inflation, was likely to have rescued a number of value-focused fund managers from the dog house.

'This bounce, which has since faded, will have lifted – at least temporarily - some of the more value orientated managers out of the doldrums after a prolonged period where quality growth companies have led the way.,' he said.

'The jury is therefore out on whether the industry has really cleaned up its act.'

Top 'dogs' to watch out for

Group 'Dog' funds Value
Aberdeen European Smaller Companies Equity , Asia Pacific Equity , Asia Pacific & Japan Equity , North American Equity , World Equity , World Equity Income £2bn
St James's Place Equity Income , Ethical , Asia Pacific £1.7bn
Henderson US Growth , World Select , Global Equity Income £1.2bn
Jupiter Global Equity Income , Global Managed , China , US Small and Mid-Cap Companies £436.4m
First State Investments Global Resources £441.6m
Old Mutual Global Best Ideas , Ethical £377.8m
M&G Global Recovery £327m
Liontrust Global Income £173.3m
Standard Life Global Equity Income £172.1m
Martin Currie European Equity Income , Global Equity Income £171.3m
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Comments  (9)

  • colin overton: 

    Aberdeen have been for sometime featured repeated in Chelsea-Cofunds Red Zone.

    15:10 on 31 July 2017

  • horshamtim: 

    One of the reasons that St James and similar wealth management groups are so profitable is the way they are able to skip round the RDR rules - by directing clients' assets into in-house funds they continue to cream off 1.5% AMC and 5% up front as compared to the more typical .75% to .85% AMC and 0% upfront charges through a funds supermarket. This is an extra level of charges over and above the percentage for managing your portfolio!

    In a lower growth world the level of charges will often correlate with the return as the portfolio needs to work that much harder - and the fund managers used by St James are no more talented than others you can access more cheaply. The fact that they do so well in pulling in clients makes the point that money and common sense do not always go together. Unless someone really has neither the time nor the wit to manage their own affairs, or can make more money spending their time on other activities, difficult to understand the attraction.

    While their shares may be worth a punt, blandishments from wealth managers to join them tend to go straight in my (recycling) bin.

    16:50 on 31 July 2017

  • Franco: 

    SJP are not getting round RDR. Their ongoing annual charge of about 1.6% may be about 2x that charged by the rest of the industry but in this country, there is no law limiting that charge, so it is perfectly in order and above board.

    I believe that on top of that, their funds have an initial charge of about 5%. SJP will also charge wealth management charge of about 3% pa, bringing the total annual charge to 4.6%.

    18:50 on 31 July 2017

  • Bryan Jefferson: 

    Top sales people work for SJP; when I asked them whether their approach is really a 'fund of funds' model, they said 'no'. It certainly feels like a fund of funds model even down to the high charges they apply!

    Of course they suggest that only clients with £100k plus to invest should use their services. I don't know whether this is because they think those people can afford to pay high charges or whether it means they earn more commission from that particular demographic.

    21:37 on 31 July 2017

  • horshamtim: 

    Franco. Sorry but you are missing the point - the RDR restrictions do not apply to such self-managed funds (nor do they apply to pension funds). By creating such self-managed funds of funds they can continue to charge the old higher rates.

    By then farming out the actual management to others they can top slice the higher management fee. I think in most people's book this can be regarded as a device to get round RDR - they could create portfolios of clean classes of such funds, but they choose not to. As you say there is no law against this, but it does say something about their operation.

    The reality is that clients of such group end up paying fairly high total charges, as you acknowledge, and the true level of these is fairly opaque - the very things that RDR was supposed to end.

    Bryan - correct - they are only interested in larger portfolios, and % fee charges rather than flat level are particularly beneficial (to them) for such portfolios, preferably belonging to people who have no real grasp of what it is costing them.

    09:10 on 01 August 2017

  • PaulSh: 

    After reading that article, I never, ever want to hear people whining again about HL's charges!

    09:30 on 01 August 2017

  • Andrew Stevenson: 

    I bought shares in St Jame's Place Capital @ 238.75 in May 2002. So I would be very grateful if you would all stop moaning (and especially 'Which').

    I did invite one of St Jame's Place 'partners' to my home to discuss taking over the management of my assets. But quite frankly the upfront and ongoing charges struck me as ridiculous. But if other people are happy to pay them that's fine by me.

    However I once had the same idea about the products the banks were pushing (which were some of the worst performing on the market), so I bought shares in the banks. I well and truly got my comeuppance there....

    19:41 on 02 August 2017

  • Stephen Tipton: 

    Liontrust Special Situations is not a dog fund - it is one of BI pedigree picks - rated 5* by them. The fund in the doghouse is Liontrust Global Income.

    16:45 on 05 August 2017

  • Daniel Grote - Citywire: 

    Sorry Stephen, you're right, I've corrected the table.

    10:50 on 07 August 2017

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