Some of the UK asset management industry's biggest names are running "dog" equity funds – serial underperformers that are not returning value to their clients, according to a new report from broker Bestinvest.
A "dog" fund is defined as one that underperforms its benchmark for three consecutive years, and does so by a cumulative 10 percent over the same period. UK investors currently have more than 23 billion pounds ($38 billion) invested in dog funds, up nearly 75 percent since November 2010.
At the top of Bestinvest's "dog list" is Fidelity, which has 22 percent of its funds by value under management in dogs – a total of 3.4 billion pounds. Newton, Blackrock, Schroders and Scottish Widows make up the balance of the top five, all with at least 1.5 billion pounds invested in dogs.
The actual number of dog funds has not increased appreciably, but the scale of them has, due to large, household names falling into the rankings.
Bestinvest's rankings do not include fixed income, property, absolute return and other specialist sectors, but are indicative of a wider concern that retail investors in the UK are sometimes being poorly served by well-known fund managers.
"I think part of it is marketing and brand awareness," Adrian Lowcock, senior investment adviser at Bestinvest, told CNBC.com. "There's an assumption that if they're good in one area, they're good in others, which doesn't follow through."
This is the case within fund groups. In the UK all equities sector, BlackRock funds appear in both the best and worst performers.
In a period of considerable uncertainty, investors also prefer products from fund groups which they perceive as being more secure, according to Lowcock. With reputable managers New Star and Gartmore both falling victim to the market turmoil, investors are more comfortable with bigger houses, he said.
Fidelity's difficulties do seem to be coming back under control, Lowcock added. The Fidelity European fund, a 3.1 billion pound vehicle, was once managed by the legendary Anthony Bolton, one of the UK's most successful fund managers. Tim McCarron took over in 2003 and performed well enough until the crisis hit, when, according to Bestinvest, he "underperformed, and failed to catch the bounce."
Sam Morse took over the fund in 2009.
"Sam Morse has come in, taken over management and he's doing OK now," Lowcock said. "They have done something to address the poor performance."
Other managers seem to return to the dog list year after year, Bestinvest notes. Andy Brough, of the Schroder UK Mid 250 Fund, returns to the ranking for the fourth year in a row.
Scottish Widows' Iain Fulton, who manages the Scottish Widows Emerging Markets Fund, the SWIP Emerging Markets Fund and The Scottish Widows Global Select Growth Fund, has the unfortunate position of being dubbed "the stand out dog manager of this report with no less than three chronically underperforming funds to his name," by Bestinvest.
A SWIP spokesperson told CNBC.com "SWIP is committed to delivering excellent performance across all its funds and has taken steps to address the performance of each of the funds mentioned in this survey."