The funds most hurt by the Woodford fallout

The funds most hurt by the Woodford fallout

Invesco’s Mark Barnett was the fund manager most damaged by the fallout following Woodford Investment Management's demise as investors pulled £648m from his UK equity income funds in the three months to September.

Figures from Morningstar show Mr Barnett’s High Income fund saw £451m of net outflows in the third quarter of this year, while £197m was pulled from his Income fund in the same time period.

Invesco’s Income fund has underperformed its peers over the past year, losing 0.5 per cent against an IA UK Equity Income sector average of 8.6 per cent growth. The High Income fund tells a similar tale and has lost 2.4 per cent in the past 12 months.

Mr Barnett, who took over from Neil Woodford at Invesco in 2014, recently told investors the performance of his funds was “disappointing” and said he regretted some stock-specific issues. He remained confident his investment strategy would prove correct in time.

Invesco’s were not the only UK equity income funds to experience high net outflows in the three months following the Woodford debacle.

NameOutflows (£m)
Invesco High Income-451
JOHCM UK Equity Income-343
Artemis Income-243
Invesco Income-197
LF Miton UK Multi Cap Income-132
Threadneedle UK Equity Income-93
Majedie UK Income-60
Malborough Multi Cap Income-54
ASI UK Income Unc. Equity-53

Even the best performing fund in the sector over the past three months, J O Hambro Capital Management’s UK Equity Income fund, saw a hefty £343m pulled from its portfolio over the quarter to September.

The fund has returned 13 per cent compared with the equity income sector average of 5.5 per cent over the past three months, though much of this came in the final weeks of the period.

A spokesperson from JOHCM said the good performance over the past three months was down to the rotation to value which started in September and had been “beneficial” to the value-oriented fund.

Not all outflows are linked to Woodford. Investors also pulled £243m from Artemis’ Income fund in Q3, which has beaten the sector average performance for the year, returning 13 per cent against 8.6 per cent. The fund's performance has dropped back in the past three months, returning 4.2 per cent compared to its peers’ average of 5.5 per cent.

But a spokesperson from Artemis said the outflows were partly down to clients replacing their holdings in the unit trust with segregated mandates, and that the actual net outflows from its income franchise was £173m. 

In terms of the fund’s performance, the spokesperson said: “We focus on the longer-term and stand by the fund’s record.”

Paul Gibson, managing director at Granite Financial Planning, said the sector's outflows were likely to be partly down to the fallout following the series of events surrounding Mr Woodford, but noted political uncertainty and Brexit also played a part.

He added: “Funds of this nature will always have a place as part of a balanced portfolio, but perhaps investors, particularly direct ones, have been over exposed.”

Scott Gallacher, chartered financial planner at Rowley Turton, agreed, adding: “I have no doubt the Woodford situation, and concern about the UK generally, will be major factors affecting confidence in UK equity income funds.”