St James’s Place fund in the doghouse over underperformance

St James’s Place’s Global Quality Fund has retained its spot as the largest fund to be consistently underperforming after falling 26 per cent below its benchmark over the last three years.

The report from Bestinvest, which identified the funds in the ‘doghouse’ due to persistent underperformance, found 137 funds struggling to match their peers.

Despite the number of funds staying steady from the last report in August 2024, the amount held in ‘dog funds’ shot up 26 per cent to £67.4bn.

Funds are selected for the doghouse when they fail to match their benchmark for three consecutive years and underperform by five per cent or more over the entire three-year period.

While St James’s Place only had two funds identified as consistently underperforming, the two that featured were the two largest funds, earning the wealth manager the title of ‘top dog’.

“Both cases have seen some management changes recently and should be seen in the context of a very large funds range of circa 40 products,” Jason Hollands, managing director of Bestinvest, told City AM.

St James’s £5bn Place’s Sustainable and Responsible Equity Fund took second place behind its £9.4bn Gobal Quality Fund peer, after the fund’s mandate was taken from Impax due to poor growth and awarded to Schroders at the start of this year.

The investment manager with the largest number of funds underperforming is a three-way tie between Fidelity, Liontrust and Columbia Threadneedle, thanks in part to their disproportionate focus on sustainable strategies.

“The financial markets have been unsympathetic to funds with ESG properties in recent years in part because of soaring energy prices but also owing to negative returns from alternative energy shares both in 2023 and 2024,” Hollands said.

The worst-performing fund identified by the report was the Artemis Positive Future Fund, which has underperformed its benchmark by 63 per cent over the last three years and would have turned a £100 investment into just £66 over the period.

Other poor performers included the Baillie Gifford Global Discovery fund (-56 per cent below benchmark) and Baillie Gifford Japanese Smaller Companies (-49 per cent below benchmark).