INVESTORS have almost £20 billion floundering in poorly performing funds — a figure that has almost doubled in the past six months, The Sunday Times can reveal.

A total £19.3 billion is invested in 92 “dog” funds, against £10.6 billion in 70 funds at the end of last year, according to the “Spot the Dog” guide from broker Bestinvest.

Equity income funds — often viewed as a safe haven in volatile times — top “dog row”: they account for over half of assets in beleaguered funds and 78.6% of those in UK “dogs”, largely due to their exposure to the banking sector.

“The number of underperforming funds tends to increase with a rise in market volatility, and this year is no exception,” said Hugo Shaw at Bestinvest.

Equity income funds aim to yield 110% of that of the FTSE All-Share index, and tend to be overweight in financials due to their historically high dividends.

However, the value of these stocks has taken a battering with the credit crunch hitting profitability. Bradford & Bingley shares have dived 79.6% since last year, while HBOS is off 63.1% and Alliance & Leicester 47.4%.

To qualify for “dog” status, a fund must underperform the relevant index, such as the All-Share, in each of the past three years, and be at least 10% below that over the entire period.

Newton accounts for the largest sum — £3 billion — of investors’ money in the “dog house”.

Prudential and its M&G subsidiary, HSBC Investments, Axa Framlington and Threadneedle complete the top five worst performing fund groups. They have £1.8 billion, £1.2 billion, £1.1 billion and £927m in “dog” funds respectively.

Do you have dogs in your portfolio? Find out free on 0800 0930700 or at www.bestinvest.co.uk/dogs

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