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New research shows Woodford as worst performing equity fund while UK investors miss out on post-Brexit opportunities overseas

News Team, 25/06/2019

Research released by Willis Owen shows that the LF Woodford Equity Income fund has been the worst performer of all the equity funds in the IA universe, losing more than three times the amount of its nearest competitor since the UK voted to leave the EU.

The findings also reveal that UK investors who remained reliant on the domestic market could have doubled their money investing overseas since the vote in 2016, with equity funds focused on the country such as Neil Woodford’s equity income offering lagging far behind competitors focused on the continent.

Adrian Lowcock, head of personal investing at Willis Owen, said: “Perhaps unsurprisingly given recent events, LF Woodford Equity Income is the worst fund of all equity mandates in the UK since the vote to leave. Investors have not only lagged the gains made by the broad UK market, but have had to suffer the ignominy of actually losing a fifth of their investment.”

The rest of the top 10 is also dominated by domestic focused mandates, all focused on UK equities, even if a number did make positive returns.

The funds have also provided well below the level of return from the UK market since the vote, with the FTSE 100 gaining 32.7 percent.  It has outperformed the FTSE Europe ex-UK index return of 30.7 percent and Japan’s Nikkei return of 29.2 percent in local currency terms, but this has not been reflected in the performance of the funds.

Meanwhile, sharp falls in the pound since Brexit has seen the exchange rate shift from over $1.40 to the pound to around $1.26 today. Sterling investors would also have enjoyed significantly higher returns had they invested in overseas markets. British investors who invested in the US market rather than the UK would have made 70 percent in sterling terms thanks to the impact of the weakening pound.

A similar story is told on the MSCI World index – which has a lot of exposure to the US as well as parts of Asia – where UK based investors could have made 58.5 percent. have made 49.3% and 48.6% thanks to moves in the pound versus the euro and the yen.

Lowcock believed the findings also showed how important diversification was for investors.

He explained: “Not only are investors potentially limiting their returns by remaining wedded to the domestic market, but they can also end up excluding themselves from key trends driving markets.

For example, while the UK market is global in nature to an extent, areas such as technology are under-represented compared to other indices globally. There is also a Brexit factor at play, with international investors shying away from the UK en masse amid the ongoing uncertainty facing the country. The fact remains international investors have gone hugely underweight the UK and that looks set to continue throughout the summer until there is some sort of clarity over Brexit – but investors shouldn’t hold their breath based on the current track record.”

Willis Owen is an online investment service provider. It now has around £1bn of funds under management and has acted as an intermediary for over 150,000 customers. It is authorised and regulated by the Financial Conduct Authority.

Worst performing equity funds since Brexit vote

Fund

Percentage
return

LF Woodford Equity Income
-19.63
L&G UK Alpha Trust
-5.81
Invesco UK Strategic Income (UK)
-5.44
Thesis TM Sanditon UK
-1.21
Jupiter UK Growth
-0.78
Invesco High Income (UK)
0.08
Invesco Income (UK)
1.06
Neptune UK Mid Cap
3.37
Legg Mason IF QS UK Equity
3.66
Castlefield B.E.S.T Sustainable Income
5.24

 

Source:  FE Analytics, Performance 23rd June 2016 to 19th June 2019. 

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