Inspired by Bestinvest’s bi-annual “Spot the Dog” fund report, highlighting the consistently poorly performing mutual funds, FSA took a sniff at the universe of mutual funds available for sale in Hong Kong, and fetched a few that have not lived up to their pedigree.
Approximating Bestinvest’s methodology, FSA used FE data to find 62 funds with annualised underperformance versus their benchmarks of more than 5% over the three-year period ending on 30 June, as measured by relative return.
The list was then narrowed down to funds that underperformed their benchmarks consistently in each of the past three 12-month periods, also ending on 30 June.
FSA’s list includes 26 funds, which altogether hold $8.9bn of AUM, globally. They come in many breeds. There are five Greater China equity funds, four North America equity funds, four energy sector funds, three fixed-income funds, one mixed-asset and one property fund.
Worst underperformers in the past three years
| Fund | 3-yr Relative Return (%) | AUM (million US$) | OCF (%) |
| Schroder ISF Global Energy | -18.4 | 511.8 | 1.86 |
| Janus Europe | -17.0 | 45.1 | 2.35 |
| Investec Global Energy | -12.7 | 680.9 | 2.68 |
Data: FE, as of 30 June 2017, performance in US dollars, relative return with respect to the fund’s benchmark. Note that during the specified period the funds may have delivered a positive return but they underperformed their benchmarks.
Among the 21 fund management companies that made it to FSA‘s list, Aberdeen, Legg Mason, MFS, Pictet and Schroders each have two funds on the list.
The energy sector appeared to be particularly hounded. The Schroder ISF Global Energy, the Investec Global Energy Fund, and the Invesco Energy Fund stood out at the bottom of the list, with the lowest three-year relative returns and a two-digit underperformance in at least two of the three 12-month periods.
The largest fund in the pack is the Legg Mason Clearbridge US Aggressive Growth Fund, with $2.2bn of AUM. The median size of the funds on the list is $173m.
The 26 funds in the doghouse charge anywhere from 1.25% to 3.77% in ongoing charges (OCF), with a median of 2%.
Top dogs
On the flipside, a similar exercise aiming at finding best funds, with a mirror version of the same criteria, yielded a list of 16 funds.
JP Morgan is the alpha dog among the outperformers, with four funds on the list, and Threadneedle is the only other company with two.
Some of the same companies that had their funds in the doghouse also have entries on the best-in-class list. In particular, the Invesco India Fund is among the four India equity funds that have been outperforming their benchmarks consistently over the past 36 months. The Pictet Digital Fund and the Schroder ISF US Dollar Bond Fund are also on the list.
Best overperformers in the past three years
| Fund | 3-yr Relative Return (%) | AUM (million US$) | OCF (%) |
| JP Morgan China Income | 19.8 | 87.8 | 2.01 |
| AB Sicav I Diversified Yield Plus Portfolio | 11.1 | 941.9 | 1.45 |
| JGF-Jupiter India Select | 9.06 | 305.9 | 1.97 |
Data: FE, as of 30 June 2017, performance in US dollars, relative return with respect to the fund’s benchmark.
The median AUM of the best performers is $368m.
The median annual fee for the best performing funds is 1.85%, with the priciest of them at 2.64%, which is lower than the poorly performing funds.
