This week Bestinvest, Tilney Smith & Williamson’s platform business, published its latest ‘Spot the Dog’ report, which shines a light on underperforming funds.
St James’s Place, Invesco, JP Morgan, and Abrdn all featured prominently on the list, holding significant amounts of client money in so-called dog funds. These are funds that have delivered a worse return than the market it invests in for each one of the last three 12-month periods on the trot.
This is a clear definition of underperformance. However, whether it can be used to suggest a firm as a whole is underperforming is a different question.
Time and time again, wealth managers tell us investment performance accounts for just a small fraction of discussion in client meetings. They say clients are far more interested in discussing their goals, succession planning, tax implications and the purpose of their wealth, among other things.
As long as their investments are broadly on track to allow clients to acheive these goals, the precise performance may not matter as much to some.
Moreover, while all firms have their own approach, investment propositions are generally quite similar across all large firms. Performance will vary across firms each year and some will do better than others. Over time, this may balance out.
For retail investors, dog funds may present more of an issue. Individuals that simply invest into a fund and do not take any advice at all, will naturally focus more on its performance.
It is still unlikely to be their only consideration, however. Customer service, ease of access, and fees will probably all be taken into account.
For high net worth clients, all of these aspects, as well as quality of advice, is important. The weighting placed on each will vary between clients, but each could be a dealbreaker to some.
Therefore, is underperforming in customer service or advice, for example, any worse than having funds that meet the dog fund criteria?
Perhaps the reason investment management performance gets so much attention is because, along with fees, it is possible to make comparisons relatively easily. It is much harder to quantify and compare the value of firms’ client relationships or their customer service proposition.
