New Report Shows Increase in ‘Dog Funds’ and Highlights Potential Disruption to Traditional Wealth Management
Fund managers have always been a topic of debate, with some praising their ability to drive market-beating performance while others criticize their high fees and underperformance. In today’s financial climate, with the rise of low-cost trackers, the pressure is on for wealth managers to justify their value and ensure their future existence.
According to the latest report from Bestinvest titled ‘Spot the Dog’, there has been a significant increase in the number of ‘dog funds’ in the market. These are equity investment funds that have consistently underperformed compared to the market they invest in. The report found that the number of dog funds has increased by 170% since August 2023, with 151 funds holding a total of £95.26 billion in underperforming assets.
To be included in the list, a fund must have underperformed the market by 5% or more over three years and have underperformed for three consecutive 12-month periods. This year’s list includes 49 global equity funds and 34 UK funds, a significant increase from the last report.
Even well-known fund managers are not immune to underperformance, as the Fundsmith Equity and WS Lindsell Train UK Equity funds managed by Terry Smith and Nick Train have made it onto the list for the first time.
The report also highlights the success of a select group of companies, dubbed the ‘Magnificent Seven’, which includes Alphabet (owner of Google), Amazon, Apple, Meta Platforms (owner of Facebook), Microsoft, chipmaker NVIDIA, and Tesla. These companies have benefited from the excitement surrounding Artificial Intelligence (AI) and have seen incredible gains in their stock prices.
Jason Hollands, managing director at Bestinvest, said, “These last three years have been one of the most challenging periods in living memory for fund managers to consistently beat markets.” He attributed this to the sharp divergence in performance from different sectors in the wake of the pandemic and subsequent events like Brexit and the rise of AI.
However, two industry veterans may have found a solution for frustrated investors. Edward Davies and Lane Clark have built a platform called TPP that aims to bring market-beating products directly to the marketplace. The platform provides access to experienced traders and their trading strategies, with leveraged trackers and ‘long or flat’ and ‘active’ strategies being the most popular. The performance of these strategies has been exceptional since inception, with no management or performance fees charged.
The rise of TPP and other similar platforms could potentially disrupt the traditional world of wealth management. As more investors seek alternative options for managing their wealth, it remains to be seen how the industry will adapt to these changes.
For more information on TPP and their services, visit www.tppglobal.io.
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Derick is an experienced reporter having held multiple senior roles for large publishers across Europe. Specialist subjects include small business and financial emerging markets.