Invesco dominates £15bn outflows from UK equity income

Henry Dixon and Colin Morton among managers who have raked in money

Invesco

Invesco and Woodford have dominated the £15.3bn net outflows from UK equity income funds since January 2016.

Invesco UK equity income funds contributed almost half the net redemptions with £7.5bn being withdrawn, while the now suspended Woodford Equity Income fund suffered £3bn outflows in the period up to April 2019, according to Morningstar.

In total, Woodford and his former employer accounted for 69% of net redemptions from the popular UK fund category.

“Considering that performance has been particularly poor for this fund over the past few years, the large outflows come as no surprise,” analyst Bhavik Parekh said of Woodford in the research note.

The large majority of the £7.5bn Invesco outflows came from the Income UK and the High Income UK funds, both managed by Neil Woodford until he announced his exit in 2013, and since managed by Mark Barnett (pictured).

Assets under management in UK equity income funds have dipped £11bn from their peak of £75bn in May 2018.

Not all doom for UK equity income

There were some exceptions to the category’s mass outflows, noted Parekh.

Man GLG UK Income, managed by Henry Dixon, has grown the most over the period, not facing a single month of net outflows since February 2016 and taking in £850m of investor money since then. Troy Trojan Income, managed by Francis Brooke, has taken in £829m since the start of 2016.

Additionally, JOHCM UK Equity Income, managed by James Lowens and Clive Beagles, and Franklin UK Equity Income, manged by a team led by Colin Morton, have enjoyed net inflows of around £450m each since the beginning of 2016.

Performance of Invesco and Woodford compared to popular UK equity income peers

6m1yr3yr5yr
Franklin UK Equity Income13.071.0233.2143.70
Invesco High Income (UK)1.93-8.602.9814.54
Invesco Income (UK)2.70-6.993.5414.07
JOHCM UK Equity Income7.32-11.0932.5928.11
LF Woodford Equity Income-11.41-20.96-18.57
Troy Trojan Income9.324.4820.4639.49
FTSE All Share index11.23-1.3134.6033.06
IA UK Equity Income sector8.48-3.7122.1826.90
Source: FE Analytics

Alternatives to UK equity income outperform

Passives and global equity income would have been a better bet for investors over the last three years, said Parekh.

The FTSE All Share benchmark most often used by UK equity income funds performed “considerably better” than the category. Poorer performance in the FTSE 250 index could point to why UK equity income funds have underperformed as they move down the market-capitalisation spectrum.

The category has also underperformed the MSCI UK Value and MSCI UK Growth indices.

“As an alternative, those investors wanting exposure to the UK could have bought a passive product or invested in a UK flex-cap or UK large-cap fund, as they have also performed better on average,” he said.

Global equity income has also outperformed UK-focused equivalents, he added.

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