Latest 'Dog funds' count is 137 but investor’s wealth jumps to £67.4bn

The number of ‘paw-performing’ funds remains at 137 but level of investor’s wealth jumps to £67.4bn, according to Bestinvest’s latest 'Spot the Dog' report.

The latest snapshot of consistently underperforming investments finds same tally as the last edition. However, the level of investors’ wealth held by the misbehaving mutts jumped 26% to £67.44bn from £53.42bn in the last edition

A quarter of woeful waggers are funds badged as sustainable, responsible, ethical or impact investments, in part a reflection of ESG investments falling foul of the huge surge in oil and gas stocks and dismal return on renewables in recent years

Global equity funds continued to be the sector with the largest number of laggards with 44 funds – the same number as the last edition - holding £35.16bn of wealth. But UK Smaller Companies was the sector with highest proportion of Dog funds as a percentage of its overall size with 11 yapping terriers

The latest list of serial underperformers highlights the risks that come from leaving an investment portfolio off the leash for too long

Spot the Dog – a biannual report closely followed by investors for more than three decades - highlights the funds that have consistently underperformed their relevant market index over three consecutive 12-month periods and by 5% or more over the entire three years analysed – in this case the three years ended December 31, 2024.

Remember, funds can endure periods of underperformance for a variety of reasons. While it can come down to poor decision making, it can also be because a style and strategy that has worked well over the longer term has fallen out of step with more recent market trends.

Investors concerned as to why so many funds are continuing to undershoot their benchmarks must consider the myriad of challenges facing the global economy over the past three years. Rapidly rising inflation in 2021 was already posing a challenge for financial markets, a phenomenon initially caused by post-pandemic supply chain pressures and then exacerbated by the surge in energy prices following Russia’s invasion of Ukraine in 2022.

This accounts for the continuation of a notable trend we have observed in recent editions: the high representation of Dog funds badged with sustainable, responsible, ethical or impact investing qualities as part of their remit. A quarter of the latest List of Dog funds fall under the environmental, social and governance (ESG) investment banner.

Jason Hollands, Managing Director of Bestinvest by Evelyn Partners, says: “The financial markets have been unsympathetic to funds with ESG properties in recent years in part because of soaring energy prices but also owing to negative returns from alternative energy shares both in 2023 and 2024. Over the three-year period covered in our latest report, the MSCI World Energy Index delivered a total return in GBP of 71.3%, well ahead of the MSCI AC World Index total return of 28.6%.

“Compare this to the alternative and renewable energy market, which fell out of favour during the post-pandemic surge in energy demand, and the story is very different; The MSCI Global Alternative Energy Index declined by –48.8% over the same three-year period highlighting why managers focused on green energy may have faced some challenges.

“We also cannot ignore the tearaway performance of names such as Nvidia, the microchip maker, Alphabet (which owns Google) and other US giants such as Amazon, Meta Platforms (owner of Facebook) and Microsoft. Along with Tesla and Apple, this narrow band of stocks earned the moniker the ‘Magnificent Seven’. While this unique club may have lost some of their lustre more recently, they contributed to AI Frenzy at the end of 2023 and early 2024 that helped to propel the US stock market and global equities. This may explain why global and US equity funds not fully exposed to this extremely concentrated band of influential stocks struggled to consistently beat the markets.”

Unsurprisingly, global equity funds dominated the latest List of serial howlers with 44, holding £35.16bn of wealth, sent to the kennels – the same number of global laggards that featured in the List last summer. However, it was not the worst-performing sector. That accolade went to the UK Smaller Companies sector, which had the highest proportion of Dog funds as a percentage of its size with 11 yapping terriers accounting for 28% of the sector.

Another area of concern, however, is the size and number of the big beasts featuring in the pack. Fifteen Great-Dane sized funds – each over £1bn in size – account for £40.14bn, and therefore 60%, of the lagging assets overall. This is a big step up from the 10 Great Danes rounded up in the last report with a combined value of £26.81bn.

Hollands added: “Our Spot the Dog analysis is designed to remind investors to monitor their portfolio at regular intervals to assess how well their assets are performing. While the report should never be treated as a ‘sell’ list, it highlights the importance of keeping a close watch on your investments and assessing what action, if any, is required and when.

“Actively managed funds can underperform for a variety of reasons – from a run of bad luck to instability in the team or simply bad decision making. So, investors should endeavour to find managers with the right skills to deliver superior long-term returns. This is imperative to justify paying the fees to be invested in those funds.

“A fund with a style or process out of kilter with recent market trends may also be adversely impacted. This is why identifying whether a fund is struggling with short-term challenges or more deep-rooted issues with long-term consequences is vital for investors considering whether to remove an investment from their portfolio.

“At this time of year when people are typically considering where they might invest their current ISA allowance, it is wise to first of all review what they already own before adding new funds.”

Top 10 worst-performing dog funds overall  

Source: Spot the Dog, February 2025 

Performance figures shown are net of fees with income reinvested.

Top 10 biggest beasts by size

Source: Spot the Dog, February 2025 

Performance figures shown are net of fees with income reinvested