They said: "This headwind to performance was most notable in 2022 and more recently amid the AI-driven share price rises for the mega cap stocks in the US.
"We have full confidence in the proven and robust investment processes of all our teams, including the Sustainable Investment team which has a strong track record over 23 years.
"There are a number of reasons why the sustainable investment team is confident about the outlook for their funds, including the quality and earnings of companies held by the funds, the valuations of these stocks, the fact interest rates are likely to be reduced further this year and that, over the long term, small and mid caps traditionally outperform large caps."
Signs of improvement
SJP had three funds in the doghouse, out of its total of 45 funds, and has seen the value of assets reduced from £18.5bn last time to £12.6 in the latest addition.
Last August more than half of the dog fund assets were held in SJP funds.
In the latest figures the value of assets overwhelmingly relates to the £10.7n SJP Global Quality Equity Fund.
The report said the fund’s style has been out of favour and has been impacted by being underweight on energy shares.
The other SJP funds included are St James’s Global Emerging Markets, which had Robeco appointed as the new manager at the end of 2023 and reduced its charges, and the Greater European Progress fund, which is back on the list after a short hiatus.
Despite still having nine funds, with £3bn of assets, on the list, Columbia Threadneedle has seen an improvement since the previous report.
Three of the funds were from its sustainability franchise which all featured last time.
The report added: “However, the weakness covered a variety of other areas. The MM Navigator Boutiques, part of the group’s popular multi‑manager franchise inherited from its acquisition of the EMEA business of BMO GAM in 2021, features again.
“The Global Emerging Markets Equity and Mid 250 funds also reappear. Asia and UK Smaller Companies are new entrants.”
Oil and gas performance spells bad news for ESG funds
Jason Hollands, managing director of Bestinvest by Evelyn Partners, says: “The high number of funds badged variously as sustainable or responsible that feature in the latest Spot the Dog report is likely in part down to the stellar performance of oil and gas stocks in 2021-22.
“Over the three-year period covered in our latest report, the MSCI World Energy Index delivered a total return in GBP of 98 per cent, well ahead of the MSCI World Index total return of 28 per cent.”
This is contrasted with the alternative and renewable energy market, which fell out of favour during the post-pandemic surge in energy demand.
