Investors Sell £6bn Invesco Income Funds for Woodford and M&G

Last year investors sold up their holdings in Invesco Perpetual's equity income funds to the tune of £6 billion - but it wasn't just Woodford Funds who benefitted from the cash

Emma Wall 27 January, 2015 | 2:32PM
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Over the past 12 months equity income investors have abandoned the formerly Gold Rated Invesco Perpetual Income and High Income funds in their droves. Following the exit of star manager Neil Woodford, many investors cashed in the funds which had each delivered a total return of more than 10% a year for the last decade.

The total £6 billion losses which were recorded from the two funds in 2014 were expected by Morningstar analysts, who downgraded the funds to Neutral last year to reflect the challenge new manager faced managing outflows of the open-ended structures.

The worst months for outflows were January and May – the month before Woodford launched his rival Equity Income fund. But not all of the £6 billion Invesco exiting cash landed at Woodford’s door.

According to Morningstar Direct asset flows data, Woodford’s new offering raked in £4 billion in 2014, impressive for a fund that only launched in June, but nearly £2 billion short of the outflows from his former funds.

The most popular fund of 2014, and certainly a net beneficiary of Woodford’s exit was M&G Optimal Income, which recorded sales of £7.2 billion in 12 months. The Silver Rated fund is an unconstrained bond fund, with the option to invest up to 20% in equities should the managers wish to. The majority of the fixed income allocation is in BBB rated bonds, at the lower end of the investment-grade bond scale.

Rush to Pick Up Property

Property investments were the fourth most popular Investment Management Association fund sector last year, according to Morningstar Direct asset flows data. The sector took nearly £6 billion, and commercial property funds featured among the top 10 by inflows.

Henderson UK Property was the third most popular fund of 2014, recording inflows of £2.5 billion. The fund gained 11.5% in 2014, and 6.3% the previous year. Morningstar’s investment strategist Andy Brunner said that after a storming run in 2014, during which IPD All Property capital values rose by around 12%, growth of that magnitude is unlikely to be repeated in 2015 as prime property yields have already fallen to levels only a little above those at the last cycle peak.

M&G Property Portfolio, run by manager Fiona Rowley also benefitted from the rush on property funds, with inflows of £1 billion last year meaning it was the sixth most popular fund of 2014.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Emma Wall  is former Senior International Editor for Morningstar