August 25, 2023
If you’ve read any financial news in the last couple of weeks, you may be aware – and concerned – that one of the UK’s largest wealth management firms topped the list of underperforming fund managers in the latest Spot the Dog report by Bestinvest.
St James’s Place (SJP) accounted for a shocking 63% (£29.3bn) of the £46.2bn held in ‘dog funds’ named in the report, which are defined as those funds lagging a suitable benchmark (such as the MSCI UK All Cap Index) by more than 5% across three consecutive 12-month periods.
For comparison, the next highest fund manager on the list, Artemis, accounts for 5.8% (£2.66bn) of the assets under management.
In simple terms, if your money is invested in a dog fund, your wealth is, at best, accumulating much more slowly than it would by investing in a comparable tracker or index fund:
|Value of £100 invested
after 3 years
|St. James’s Place Global Quality
|St. James’s Place Global Growth
|St. James’s Place International Equity
|St. James’s Place Growth European Progress
One of the reasons that SJP has six underperforming dog funds (out of 56 total named in the report) is because of the fees charged, which can impact returns significantly.
Jason Hollands, managing director of Bestinvest, said: “St James’s Place outsources the management of its funds to external fund managers and charges a premium for doing so. The annual costs on the two largest global funds are 1.88%. Only one fund in the sector has higher costs.
“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.”
At Lexington, we use an evidence-based investment philosophy back by Nobel Prize-winning research. The case for investing in index funds versus actively managed funds is clear when you look at data like this from S&P Global:
To take one example: across the whole of Europe, over a 5-year period, just 9% of active funds have outperformed the S&P Europe 350 index.
In short, you’re in elite company if you’re an active investor and beating the stacked odds against you.
And if you’re paying a premium in one of their dog funds, you’ve certainly not been beating those odds for some time at least.
Investing in the markets is always a long-term strategy, and we’d never recommend knee-jerk reactions. But one of the things that makes the Spot the Dog report so widely read and reported on in the financial planning world is that it tracks fund underperformance over a three-year period; it’s not simply a snapshot.
If you’re concerned about your dog fund, we’d like to offer you a free second opinion on your investments – without any obligation or commitment.
We’re a multi-award-winning boutique wealth management firm that prides itself on personal service. We’re also huge advocates of the financial planning profession. So naturally, we want people to have a positive investment experience that helps them achieve their goals, and live their life by design, not by default.
Our approach is quite different to SJP’s, and other large ‘wealth managers’ such as Coutts and Barclays Wealth. So if you think it’s time to try a different approach to managing your investments – one that’s backed by decades of academic noble prize winning research – then we’d like to speak with you, please do get in touch.