Invesco Perpetual has topped a biannual list of worst-performing investment funds for the fourth time, with the highest amount of assets in underperforming funds on sale in the UK.
According to a ranking compiled by online investment company Bestinvest, the Henley-based asset manager has £13.1bn sitting in 11 underperforming funds — an increase on the six funds identified in the August report.
Invesco’s £5.7bn High Income and its smaller £170m UK Strategic Income funds were the worst offenders, both losing 18% over the last three years. Both funds are managed by Invesco’s co-head of UK equities, Mark Barnett, the former protégé of Neil Woodford — a fallen star of UK stock-picking.
An Invesco spokeswoman said: “This report is a statistical analysis over a specific time period, so different funds and groups will appear and drop off depending on the performance as at a specific time.”
Following a prolonged period of heavy investor withdrawals, Barnett has made attempts to reassure investors about liquidity management across his equity income funds. Some have been spooked by comparisons with Woodford.
Morningstar, the data provider, estimates Barnett’s Income, High Income and UK Strategic Income funds posted net outflows of at least £1bn in the last quarter of 2019, despite an improvement in performance.
Zurich, a pensions provider, stopped offering Barnett’s Income and High Income funds to customers in early January. It said at the time it had “become concerned about an ongoing reduction in size of the funds, and the manager’s ability to manage liquidity effectively over the longer term”.
“The Invesco funds mentioned have a disciplined valuation-driven philosophy, which has been out of favour. As active managers, we maintain our conviction in our investment philosophies and consistent approach to investing, which we believe has served our clients well. We continue to believe that these strategies are well positioned to deliver strong returns for the long-term investor.”
Bestinvest identified 91 underachieving funds managing £43.9bn, which between them collect more than £410m in fees and charges annually. Funds that appear on its “Spot the Dog” list underperformed their benchmarks by 5% or more over the past three years, after fees.
JPMorgan Asset Management ranked second behind Invesco after a single fund — its £3.8bn JPM US Equity Income fund — put it on the list. The fund, which has lost investors 8% over the past three years, targets dividend-generating US companies.
Bestinvest said: “Even some of the largest US companies don’t pay dividends, including many of the technology and media companies whose stock prices have powered the US market in recent years. This has made it difficult for managers of US income funds to keep pace with the wider market returns.”
JPMorgan Asset Management declined to comment.
Woodford’s now-defunct Equity Income fund, which was closed down in October to begin the process of returning money to investors, was third on the list, having made its debut for the first time last year.
Link Fund Solutions, Equity Income’s administrator, suspended the £2.9bn fund in June 2019 after Kent County Council moved to pull its entire investment of around £240m. Link declined to comment.
UK-listed asset manager Schroders took fourth spot in the list after seven of its funds, managing almost £3bn collectively, were identified as poor performers. The largest of these is the Global Active Value fund, which has lost 15% over the past three years.
Schroders said: “Value investing is the art of buying stocks which trade at a significant discount to their intrinsic value. We recognise that there will be periods of underperformance given where we are in the market cycle and we remain confident that our strategies will perform for investors.”
Jason Hollands, managing director at Bestinvest, said: “2019 was overall a fantastic year for stock markets across the globe, providing investors with double-digit returns. However, in many cases the returns enjoyed have had little to do with the decisions taken by fund managers and they may be substantially lower than the gains delivered by overall markets. In these circumstances, investors have basically paid fees for little or no added value.”
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