Inspired by Bestinvest’s bi-annual “Spot the Dog” fund report, highlighting consistently poor-performing mutual funds, FSA took a look at funds available to Hong Kong investors in order to find the worst of the worst at the end of 2017 (we did it first in August 2017).
Approximating Bestinvest’s methodology, FSA used FE data to find funds that underperformed their benchmarks by 5% or more on an annualised basis, during the three-year period ending 31 December, as measured by relative return. We found 51 such funds among the 1,766 funds and ETFs registered for sale in Hong Kong (those for which benchmark data were not available were excluded).
The list was then narrowed down to funds that underperformed their benchmarks in each of the past three calendar years.
FSA’s list includes 28 funds. All but one of them are equity funds. Four funds focus on North America, three on Latin America, three on Greater China and three on technology, while the remaining 15 are a mix of individual Asian markets and sector funds. Notably, no European, Japanese or India equity funds made it to the list.
Aberdeen and Invesco each had three funds in the doghouse, while Allianz, Legg Mason and Pinebridge had two funds each.
Worst underperformers in the past three years
| Fund | Benchmark | 3-yr Relative return (%) | AUM (million US$) | OCF (%) |
| First State China Focus | MSCI China | -10.7 | 195 | 2.13 |
| Allianz China Multi Income Plus | MSCI China/JACI China | -10.5 | 7.8 | 1.55 |
| Invesco Energy | MSCI World Energy | -10.3 | 174 | 1.91 |
| Janus Henderson Opportunistic Alpha | S&P 500 Total Return | -9.84 | 26 | 2.40 |
| Investec Global Energy | MSCI AC World Energy | -9.36 | 560 | 2.66 |
Data: FE, as of 31 December 2017. Performance in US dollars. Relative return with respect to the fund’s benchmark, averaged over three years. Note that during the specified period the funds may have delivered a positive return but they underperformed their benchmarks.
The 28 dog funds come in all sizes, with the largest, the Aberdeen Global Asian Smaller Companies holding $1.97bn in assets. The funds also tend to be on the expensive side, with OCFs between 1.55 and 2.66, and the average of 2.03%.
Top dogs
On the flipside, a similar exercise aiming at finding best funds, with a mirror version of the same criteria, yielded a list of 11 funds that consistently outperformed their benchmarks.
Fidelity is the only company with two funds among the 11, while the same Allianz that had two funds in the doghouse, has one among the top dogs.
Five of the 11 were China or Greater China equity funds, while no US or developed European equity funds made it to this select group (one emerging Europe equity fund did).
Best overperformers in the past three years
| Fund | Benchmark | 3-yr Relative return (%) | AUM (million US$) | OCF (%) |
| Allianz China A-Shares | MSCI China A Total Return (Net) | 15.78 | 246 | 2.3 |
| UBS (Lux) Equity Greater China | UBS Greater China Index | 11.24 | 900 | 2.41 |
| Matthews Asia China Small Companies | MSCI China Small Cap | 9.03 | 9.1 | 2.25 |
| HSBC GIF Asia Ex Japan Equity Smaller Companies | MSCI Asia Pacific ex Japan Small Cap Net | 7.09 | 1,659 | 1.84 |
| Pictet Digital | MSCI World | 6.1 | 2,950 | 2.01 |
Data: FE, as of 31 December 2017. Performance in US dollars. Relative return with respect to the fund’s benchmark, averaged over three years.
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The 11 outperforming funds have, on average, lower fees than the 28 funds in the doghouse. The average OCF is 1.94%, with the range between 0.96% and 2.41%.
