Some of Britain’s most high-profile managers have been singled out in a survey of the country’s worst-performing “dog” funds.

Investors have a staggering £14.2 billion in serial underperformers, according to the survey by Bestinvest, the financial adviser — with some big name managers among them.

Schroders, for example, has £1.76 billion under management in poorly performing funds, owing largely to the surprise inclusion of Andy Brough’s £1.7 billion UK Mid 250 fund, which invests in small and medium-sized firms.

To be included in Bestinvest’s survey, a dog fund must have underperformed its benchmark in each of the past three years as well as by 10% or more cumulatively over that period. Brough’s fund is down 12.39% over the past three years compared with a gain of 0.42% in the FTSE 250, according to Bestinvest’s figures.

Schroders said: “To put the Bestinvest report into context, over one year and in the recent rally, not one mid-cap fund has outperformed the index. Against its benchmark, the Schroder Mid 250 fund is the second-best performing fund of its type in the year to date (up 18%) and over six months (up 46%). We are confident the fund will continue to deliver for investors in the years to come.”

The failure of managers to match this year’s equity rally is highlighted by the survey. Investments in dog funds almost doubled from £7.2 billion to £14.2 billion from December 31 to September 30 — despite “a stock market recovery of breathtaking proportions,” Bestinvest said.

Adrian Lowcock at the firm, said: “This illustrates just how vital it is that investors review their portfolios regularly to ensure they are getting the best possible returns.”

Jupiter is the firm with the most assets in the dog house because of a slip in performance of its flagship Income fund, managed by Tony Nutt and worth £2.98 billion.

However, Bestinvest conceded “there are worse dogs in the UK sector — and we would be surprised to see it there again next time round”.

The number of equity funds in the dog house has risen from 25 to 40 since January. Lowcock said: “Equity income funds . . . feature more heavily in the figures because they haven’t benefited from the rally which began in March.”

The market upturn — which has seen the FTSE 100 rise 19.9% during the past nine months — has been driven by recovering banking stocks, many of which no longer pay a dividend, he said.

Jupiter pointed out that in Bestinvest’s spring 2009 report, the Income fund was highly rated. It said: “We are confident that the fund’s focus on quality companies will deliver for investors in the years of weak economic growth that are ahead of us.”

Scottish Widows, comprising Scottish Widows Investment Partnership, St James’s Place and newly-formed Henderson New Star, also made the top five managers of dog funds. Bestinvest said: “In January, [St James’s Place] had no dogs. Now two of its eight funds qualify, representing about 33% of assets under management.”

Henderson New Star has three funds worth £705m in the survey compared with just one last time. They are Henderson Global Care UK Income, Henderson UK Equity and Henderson UK Growth & Income. Lowcock said: “The bad news is that the worst performers have been the bigger funds where UK investors have a higher proportion of their cash invested.”

Deal-breaker

The discount broker Chelsea Financial Services has stopped advising clients to buy New Star’s Global Financials fund after the surprise departure of manager Guy de Blonay.

Darius McDermott, CFS managing director, downgraded the fund from a “buy” to a “hold”, adding that De Blonay was a “deal-breaker” when Henderson acquired New Star last year. He said: “As he was the key manager on the fund, I felt I had no other choice but to downgrade the status,” adding that rival Jupiter, which De Blonay rejoins in 2010, will now become the leading financials fund manager in the UK.

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