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Invesco is closing its standalone UK equities team, previously led by stockbroker Neil Woodford, and merging it with its European division amid an industry-wide decline in interest in UK equities.
The US-based asset manager said the move to merge departments “to create one Pan European Equity Team” will take effect from January and aims to encourage “collaboration” between the Henley-on-Thames-based divisions. Invesco added that the decision “was made at Henley by the investment management teams”.
But the move is yet another setback for UK equity funds. The decision marks the end of an era after Invesco’s UK equities team came under fire from its former star stock picker Woodford, who worked for Perpetual before it was bought by Invesco in 2000.
Woodford – who is being investigated by Britain’s financial watchdog following the collapse of his £3.7bn Equity Income fund in 2019 – rose to prominence in the active management industry after shunning tech stocks just as the bubble burst at the turn of the millennium. Instead, he invested in “old economy” stocks like tobacco companies, boosting his performance as rivals floundered.
Ben Yearsley, chief investment officer at consultancy Fairview Investing, said: “Invesco Perpetual has been the UK market for a lot of people for probably about 15 years – they’ve been synonymous with each other. This was of course at the top of Woodford. But ten years later and it seems to have gone down the drain.’
Woodford oversaw around £33bn across the Invesco UK Equity Income and High Income funds, including money he used to run for trustee St James’s Place. However, these funds now manage around £1bn and £2.3bn respectively.
UK equity funds have suffered a consecutive quarter of customer outflows as clients continue to pull their money out of underperforming domestic stocks in a bid for higher returns from global equities. Investors are also pulling their investments out of actively managed funds in favor of cheaper index trackers.
UK equity funds suffered net retail outflows of £1.3 billion in April, according to the Investment Association, a trade body.
This reflects wider unease for London’s capital markets. A number of domestic companies, including Cambridge-based chipmaker Arm, have rejected the City in favor of a US listing to get a higher valuation. London is also suffering from a lack of initial public offerings, raising just £300m in the first quarter – lagging behind mainland Europe.
John Surplice, director of Emea Equities at Invesco, said the two teams had “always worked closely together” and “shared many investment resources”. He added that the move “simply further formalizes this collaborative approach.”
Invesco’s UK team consists of seven fund managers, led by Martin Walker, who will co-lead the newly merged European equities team with Oliver Collin.
The UK team oversees around £7bn, while the European equities department manages more than £8bn, according to figures at the end of March.
After leaving Invesco, Woodford founded his eponymous firm in 2014. It was forced out of business in 2019 due to poor stock picking and problems trying to sell assets to meet customer withdrawal demands, leaving thousands of investors nursing losses.
The UK’s Financial Conduct Authority said in April that Woodford had “misunderstood” his liability in the run-up to the collapse of his capital income fund; the decision is difficult for Woodford.
This article has been amended to correct the spelling of Oliver Collin’s name.