Take your fund at face value … and you could end up in the dog house, with other poor performers

You might be surprised to discover what some of the largest funds run by star managers are investing your money in, and could find it is not what you thought you signed up for in the first place, or that they are not as "safe" as they seem.

The latest "Spot the Dog" guide by Bestinvest reveals the worst-performing funds in the market. And it's no coincidence that some of the funds in the doghouse aren't doing what you expected when you originally bought them.

Among the worst of them is the BlackRock UK fund, which was managed by Mark Lyttleton until early last year. Over three years, the fund would have turned your £100 into a measly £111 at a time when the UK market has enjoyed relatively strong growth. Although the fund has seen a change in manager, with Nick Little taking over, it has not seen a transformation in fortunes, with performance still languishing at the bottom of the tables.

However, if you bought into Mr Lyttleton's investment process when you got the fund, you might not realise the new manager is quite different and that, ironically, had Mr Lyttleton stayed in charge of the fund, his style would over the last year probably have brought performance back.

"The BlackRock UK fund has had a torrid time," says Peter Sleep, a fund manager at Seven Investment Management. "Mr Lyttleton invested in a lot of small and mid-sized companies, and a lot of resource firms, which have been out of favour for the past four years.

"He was replaced by a fund manager that bought stable, high dividend paying companies – that had done well over those four years. This was unfortunate, because for the past six months it is the small stocks and resource companies that have performed well, while stable, high dividend paying companies have underperformed," adds Mr Sleep.

And it certainly hasn't gone smoothly in recent years for Anthony Bolton, who was one of the UK's top fund managers not too long ago. Those who latched on to Mr Bolton's reputation as a top investor and bought his Fidelity China Special Situations trust in the hope he could replicate such stellar returns have been sorely disappointed. But if you look a little deeper, you might also be flummoxed by some of the things he has bought, which are a far cry from the Chinese shares you may have thought filled the fund.

"At least some of his poor performance comes down to owning smaller Chinese companies, but investors might find a few unusual investment choices," says Ben Seager-Scott, an analyst at Bestinvest.

"During the first year of the fund's life, the biggest loss of value wasn't an investment in a stock at all – the manager spent a large slug of investors' money buying a form of insurance on the South Korean stock exchange, as he was seriously worried about an escalation in the conflict between North and South Korea," adds Mr Seager-Scott.

"Clearly the newcomer to the region thought he knew something no one else did, as I'm not aware of any other managers – even some of the well-established regional experts – that thought this kind of event of was a reasonable possibility."

Although there is an element of trust when you hand over your money to a fund manager, you should be aware of what is in the fund. "People used to look at fund names, such as UK equity income, and think they knew what it's going to deliver," says Philippa Gee, who has her own wealth management firm. "But it's not the case – these funds can vary widely in terms of what they invest in – so don't just buy a fund name."

But just because you might find a few surprises, it doesn't mean the fund is a bad investment. On the contrary, one of the best-performing managers, Neil Woodford, who oversees more than £30bn, buys large chunks of tiny companies you've probably never even heard of.

However, while he may be widely renowned for investing a large amount of your money in the huge, "safe" tobacco and pharmaceutical companies, he also owns more than half of certain small companies that aren't "listed" and don't trade on the stock exchange – making them riskier.

"What's less well known is that, because of the size of the fund, he has positions in small unlisted companies," says Adrian Lowcock at Hargreaves Lansdown. "There is potential extra risk here, because if there is a crisis, he would struggle to sell out of those companies.

And as they are not on an exchange, they are difficult to value."

However, even though Mr Woodford owns a lot of some smaller companies, he runs so much money that they only amount to a tiny percentage of his funds. "Your first reaction could be 'hang on, he owns a big stake in this tiny company – that's huge'," says Graham Duce, a fund of funds manager at Aberdeen.

"But in terms of how much of the Invesco funds that actually represents, it's a very small amount. While he has got sizeable stakes in companies, he's not risking large amounts of capital for investors."

Mr Woodford has 21 unlisted companies – only 4 per cent of the Income fund. "These are riskier because they are new ideas," says Will Deer at Invesco Perpetual. "But if we get them right, we expect to put more money into them." Mr Deer adds that, while the likes of AstraZeneca and GlaxoSmithKline are today's giants, Mr Woodford is trying to uncover tomorrow's.

Still, smaller companies and those not on the stock exchange are definitely riskier, and less capable managers could run into trouble. "Some have come unstuck buying unlisted stocks, like Morgan Grenfell a few years ago," says David Coombs at Rathbones. "If a big manager were to put 20 per cent of the fund in unlisted stocks, I'd be pretty annoyed."

Mr Coombs also highlights that if a UK manager, for example, buys overseas shares – which they are able to do up to a limit – you need to see if there is any crossover with your other investments. For example, Mr Woodford owns the Swiss group Roche, and some of the other large European managers will hold this company too.

Although it requires a little more work, looking beyond a fund's name and asking your adviser or the fund group questions about the nature of its investments definitely pays off, and will help prevent surprises at the quirkier holdings over time.

Emma Dunkley is a reporter for Citywire.co.uk

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In an earlier version of this story we mistakenly reported that Raven Russia is an unlisted company it is in fact a member of the FTSE 250 share index.