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Woodford the worst since Brexit vote as UK investors miss out by “backing Britain”

Posted by Adrian Lowcock in Press releases category on 21 Jun 19

UK investors who have stuck rigidly to the UK since Britain voted to Brexit could have doubled their money by investing overseas, with equity funds focused on the UK – including Neil Woodford’s equity income offering – lagging far behind peers, according to research from Willis Owen.

Having voted to exit the European Union on June 23rd 2016, 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 vote to leave.

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 remainder of the top ten is also dominated by domestic focused mandates, with all ten funds in the list focused on UK equities, although a number did make positive returns.

 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. Total Return in pounds sterling 

All ten are also well below the return from the UK market since the vote, with the FTSE 100 having gained 32.7% , outperforming the FTSE Europe ex-UK index return of 30.7% and Japan’s Nikkei return of 29.2% in local currency terms.

Only the US and global indices as a whole have gone higher than the UK, with the S&P 500 currently at a record peak having risen some 44% since late June 2016.

Nonetheless, following the sharp falls for the pound since Brexit which has seen it move from over $1.40 to the pound prior to the vote to leave to around $1.26 today, sterling investors would have enjoyed significantly higher returns had they invested in overseas markets.

For example, if Brits had invested in the US market rather than the UK, they would have made 70% in sterling terms thanks to the impact of the weakening pound.

Similarly, by investing in the MSCI World index – which has a lot of exposure to the US as well as parts of Asia – they would have made 58.5%. Even in Europe and Japan where returns in local currency have been lower, sterling investors would have made 49.3% and 48.6% thanks to moves in the pound versus the euro and the yen.

“The key message for investors is just how important diversification is,” Lowcock said.

“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”, Lowcock said.