Analysing Underperforming Investment Funds in 2025 (In the Doghouse)
- Nihinlolawa 'Lola' Sanni
- Feb 23
- 3 min read
Bestinvest’s latest Spot the Dog report has once again spotlighted underperforming funds in the UK investment space, revealing that a staggering £67.4 billion of investor capital is tied up in so-called “dog” funds. This marks a sharp rise from £53.4 billion reported just six months ago, underlining the ongoing struggles within the asset management industry (FT).
St James’s Place: A Familiar Name in the Doghouse
St James’s Place (SJP) remains a central figure in this year’s report, with its Global Quality Fund maintaining its unfortunate title as the largest underperforming fund. With an AUM of £12.8 billion, it has lagged its benchmark by 26% over the past three years, raising concerns over SJP’s fund management and oversight processes (City AM).
Despite this underperformance, SJP continues to attract investor capital, reporting £4.33 billion in net inflows in 2024, pushing total assets under management (AUM) to a record £190.2 billion (Reuters). This paradox highlights the complex relationship between investor loyalty, brand trust, and actual fund performance.
Fidelity’s Global Special Situations Fund: Struggling Against Macroeconomic Headwinds
Fidelity’s Global Special Situations Fund, managing an AUM of £4.7 billion, also finds itself in the doghouse, having underperformed its benchmark over the past three years. The fund has been hit hard by rising inflation and interest rates, factors that have destabilized global equity markets and challenged its growth-focused strategy (Financial News).
Liontrust’s Special Situations Fund: Navigating Market Volatility
Liontrust’s Special Situations Fund, with an AUM of £3.2 billion, has similarly struggled, with its UK equity-focused portfolio underperforming amid ongoing market volatility. Rising inflation and concerns over economic growth have dampened returns, leading to performance that falls short of investor expectations (Financial News).
ESG and Smaller Company Funds: Facing Unique Challenges
The Spot the Dog report also highlighted difficulties faced by ESG (Environmental, Social, and Governance) funds. These strategies have been hurt by the rising costs of energy and the underperformance of alternative energy stocks. Many ESG funds, which previously saw inflows during the green investing boom, have struggled to adapt to the shifting market dynamics. For example, the XYZ Sustainable Growth Fund with £1.9 billion AUM has seen notable underperformance in the past year (FT).
Smaller company funds, particularly those focused on UK equities, have also had a tough run. Market volatility and a risk-off sentiment have disproportionately affected small-cap stocks, leading to higher instances of underperformance in this sector. The ABC UK Smaller Companies Fund, managing £850 million, has been particularly impacted.
Industry Takeaways: What This Means for Investors
The sharp rise in assets tied up in underperforming funds underscores a key challenge for both fund managers and investors. For investment managers, the report is a wake-up call to reassess strategies, enhance risk management, and ensure they’re delivering value in a complex market environment.
For investors, this report is a reminder of the importance of ongoing portfolio reviews. Staying invested in underperforming funds can erode long-term returns, making it essential to periodically evaluate fund performance against benchmarks. Tools like Bestinvest’s Spot the Dog report can serve as valuable resources for identifying funds that might warrant a closer look.
As the investment landscape evolves, navigating the complexities of fund selection becomes increasingly critical. While brand loyalty and reputation matter, performance ultimately drives returns — and investors should remain vigilant in ensuring their portfolios align with their financial goals.
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