The group's biannual "Spot the Dog" study highlights Jupiter as the worst offender, with £2.62bn of assets under management (AUM) in dog funds, £2.47bn of which is in one fund; Tony Nutt's Jupiter Income. Jupiter has 36 per cent of its assets in dog funds.
"Jupiter Income is a surprise entry to the kennel club and has suffered as the manager's favoured area of the market, blue chip defensive companies, have failed to keep up with the broader market rally," said Bestinvest senior investment adviser Adrian Lowcock.
"Nutt has a good long-term track record, but at the moment is staking this on an out of favour area of the market. Only time will tell if this dog gets a bonus," he added. To hear more of Lowcock's thoughts on 'dog funds', click here.
Performance of Jupiter Income vs sector and FTSE All Share over 3-yrs
Source: Financial Express Analytics
Dog funds are so rated as they have underperformed their respective benchmarks in each of the past three years, and have underperformed their specific benchmark by 10 per cent or more over three cumulative years.
Nutt also manages the Jupiter High Income and the Jupiter Distribution funds, both of which have outperformed their respective sectors over three years. The manager himself has outperformed his peer group since as far back as 2000.
Also in the dog house are Schroders, with £1.56bn of AUM in two underperforming funds, Scottish Widows and SWIP, with £2.14bn in 11 funds, Henderson, with £871m in four funds and Gartmore, which has £941m in five poorly performing funds.
Scottish Widows and SWIP are persistent offenders in the list, and have climbed from fourth worst investment house six months ago to second worst this month. More than 40 per cent of Scottish Widows and SWIP's AUM is in funds which are underperforming, including SWIP UK Income, SWIP UK Smaller Companies, SWIP Emerging Markets and Scottish Widows Japan Growth.
"Something needs to be done to address performance," Bestinvest said in the report.
"The departure of fund managers in the emerging markets team may be a blessing in disguise. However, the issue of poor performance crosses sectors," it added.
Gartmore has five funds in the dog house from across a range of sectors. Lowcock says this can't be explained away by the distractions which have come this year, including the suspension, rehiring, and finally resignation of star manager Guillaume Rambourg.
"The fund manager has been in the news for all the wrong reasons this year... [but] we look at performance over three years. With nearly a quarter of AUM in the dog house, Gartmore has its work cut out in 2011,” he said.
The news is not all bad, however. While Henderson, which acquired New Star in January last year, has four dog funds under management, it has moved up from third worst position in April this year to fifth.
"Last time, we believed there were tentative signs of an improvement across the range. With a significant fall in the number of funds in the dog house the signs are that this trend is continuing," Lowcock said.
Adrian Lowcock is senior investment adviser at Bestinvest. The views expressed here are his own.