£15bn going to the "dogs"

The guide exposed 133 "dogs"

One in seven investment funds actively managed by a fund manager and a team of researchers is failing, according to analysis published on Saturday.

The latest "Spot the Dog" Guide - produced by Investment Analysts and Brokers Bestinvest - has exposed 133 underperforming funds, representing £15bn of investors' money.

To qualify for dog status, a fund must have underperformed in each of the last three years, ending up at least 10% below the general movement in share prices.

It may be possible the fund management group has already taken action to improve performance Justin Modray, Investment Advisor

Life companies and banks continue to dominate the guide, including Scottish Widows, which has no less than £2.2bn spread across 12 dog funds.

Abbey National's position remains the same as six months ago and shows no signs of improving, according to BestInvest. And its £1.2bn UK Growth Fund has been named the largest dog of all.

The total number of dog funds has fallen from 149 to 133 in the last six months, but John Spiers, Bestinvest Managing Director said that despite this: "market rises mean their overall value has actually increased over that period".

In the US sector, Threadneedle - now owned by American Express - is one of the biggest offenders, with two dogs totalling more than £1.1bn.

Dump the dog?

John Spiers has advised investors in the US sector to choose their fund managers wisely:

"The North American sector remains one of the most difficult for fund managers to prove their worth as 38% of the funds we analysed were dogs".

Many investors hold on to dogs in the misguided belief that things will eventually improve or that all funds perform similarly John Spiers, Bestinvest

The appearance of funds on the list may prompt investors to take action, but Justin Modray of Investment Advisor said: "Dog funds are not an automatic sell.

"It may be possible the fund management group has already taken action to improve performance."

However, he added that investors must satisfy themselves that the funds are worth persevering with, and that the portfolio balance is appropriate for their needs.

John Spiers however, was less forgiving. He said:

"Many investors hold on to dogs in the misguided belief that things will eventually improve or that all funds perform similarly. Experience suggests otherwise."

BBC Radio 4's Money Box was broadcast on Saturday, 24 January, 2004 at 1204 GMT.

The programme was repeated on Sunday, 25 January, 2004 at 2102 GMT.