In funds with a liquidity mismatch, the First-Mover Advantage is huge, as Woodford’s investors found out.
On Oct 15., it was announced that Neil Woodford’s flagship Equity Income fund (WEI), which has blocked redemptions since June, would be closed for good. And signs are emerging that the problems that bedeviled WEI may be spreading to the wider UK equity fund sector. Across all UK-domiciled funds, investors pulled £2.1 billion in September taking net outflows this year to £7.3 billion, according to data from Morning Star.
Here are the active funds that bore the brunt of the exodus:
- Standard Life Aberdeen’s flagship Gars fund, which saw outflows of £392 million in September and which is down £8.9 billion over the past 12 months, shrinking the fund’s asset base to £6.5 billion.
- Majedie, an £11 billion active equity boutique that suffered £269 million of redemptions, a monthly record.
- Lindsell Train, the largest managed UK shares fund, also registered a record £374 million of net outflows in September despite returning 25% over the first nine months of 2019. Confidence in the fund was hit by the decision in July of the UK’s biggest broker, Hargreaves Lansdown, to remove the Lindsell Train UK Equity Fund from its Wealth 50 Best List due to liquidity concerns.
- Invesco’s UK-focused funds, which suffered the biggest wave of redemptions in September — £967 million — and is down £8 billion over the past 12 months.
Invesco’s UK business was, ironically, managed, with incredible success, by Neil Woodford until 2013, when he left the U.S. firm to set up his own investment company, taking many of his Invesco clients with him. So formidable was Woodford’s reputation in the fund sector at that time that he was able to raise £10 billion in his first two years of going solo.
For Invesco, the opposite happened. Since Woodford’s departure, the firm’s UK-focused funds have leaked £15.4 billion. More than half of those funds were redeemed in the last year alone. Things were hardly helped when the two main funds — the Invesco High Income fund and Invesco Income fund — featured prominently in Bestinvest’s 2018 “Spot the Dog” report, which highlights the sector’s worst performers. In September, it saw its worst outflows since Woodford’s departure.
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Nick Corbishley 