Liquidity concerns mount as investors pull at least £1bn from Invesco funds in the final quarter of 2019
Investors pulled at least £1bn from Invesco funds managed by Mark Barnett in the final quarter of 2019 amid mounting concerns over liquidity following the collapse of Neil Woodford’s investment empire.
Estimates from financial data provider Morningstar suggest the three funds managed by Barnett — Invesco Income, High Income, and UK Strategic Income — suffered total outflows of just over £1bn in the final three months of the year.
Over the past three years, Barnett’s funds have fallen in value from £16bn to £8.5bn at the end of 2019.
The manager, who took over from mentor Neil Woodford at Invesco in 2014, moved to reassure investors in November that his funds would not fall victim to the liquidity problems that helped bring down Woodford’s company last year.
Barnett took the unusual step after being hit by Morningstar downgrades on two funds over their exposure to smaller and illiquid companies.
The withdrawals mean Barnett suffered his worst quarter for fund redemptions since the three months ending September 2014, just after Barnett took over the running of the funds from Woodford, according to Morningstar data.
Redemptions spiked in November following the downgrades by a Morningstar analyst, with investors pulling £449.6m from the funds during the month, up from £231.6m in September.
Although outflows slowed by comparison, they remained elevated in December, hitting a total of £329.3m.
Willis Owen’s head of personal investing, Adrian Lowcock, said the withdrawals were “a perfectly understandable reaction” from investors, but that the situation with Barnett’s funds was “materially different to Woodford”.
A key reason for this, Lowcock continued, is that Invesco has “stronger compliance and risk management departments” than Woodford’s firm, and that while Barnett is a high profile manager, he is “one of many employees” at Invesco and not its sole star manager.
AJ Bell personal finance analyst Laura Suter agreed, adding that the outflows from Barnett’s funds “are more likely to be due to concerns over his portfolios and their performance than any parallels with Woodford”.
Earlier this month, Pensions provider Zurich pulled Barnett’s Income and High Income from the selection of funds it offers to customers.
Zurich said in a statement 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”.
Invesco declined to comment on the outflows, news of which was first reported by Citywire, but a spokesperson said the investment company was “disappointed” with Zurich’s decision. They hoped this is a short term view and will continue to aim to provide the best outcome for clients in line with the funds’ stated objectives. Their standard procedures include regular stress testing of liquidity under a variety of conditions and time frames.
In a statement issued in November, Barnett conceded that “capital returns in my portfolios since around the time of the 2016 referendum have been disappointing”.
In an outlook note published in December, Barnett said he expected greater political certainty to boost UK equities, adding that he remains convinced that domestically orientated equities offer the greatest risk adjusted opportunity to investors.