The Woodford factor dominates the latest research into the country’s poorest performing investment funds, published this weekend by fund platform Bestinvest.

Its analysis, based on detailed scrutiny of the three-year investment records of more than 700 funds – between them managing nearly £400billion of assets – reveals that the two worst performing are a fund run by Neil Woodford and one that he managed until recently before being unceremoniously sacked.

Both funds recorded losses over the three years, despite the UK stock market rising by 29 per cent.

Two others in the worst ten were managed by Woodford before he set up his own investment business more than five years ago – and continue to be run along similar lines.

Neil Woodford: The Woodford factor dominates the latest research into the country’s poorest performing investment funds, published this weekend by fund platform Bestinvest

Neil Woodford: The Woodford factor dominates the latest research into the country’s poorest performing investment funds, published this weekend by fund platform Bestinvest

Neil Woodford: The Woodford factor dominates the latest research into the country’s poorest performing investment funds, published this weekend by fund platform Bestinvest

Woodford Equity Income, says Bestinvest, has the worst record of all funds scrutinised when measured against its comparative stock market benchmark over the past three years. 

Dealings in this £3.4billion flagship Woodford fund were suspended in early June when it could not meet a demand from a big institutional investor for its money back after it was disappointed with the fund’s performance.

Although Woodford has been frantically selling holdings to build a cash buffer for when dealings recommence, the fund is unlikely to reopen until December at the earliest. 

Despite the move into cash and the fact that investors’ money is frozen inside the fund, Woodford continues to charge a management fee, equivalent to £65,000 a day – more than £4.5million since Equity Income shut up shop in June.

If the fund remains suspended until December and Woodford does not buckle under immense pressure to waive fees, his asset management company Woodford Investment Management will have taken more than £10million in fees since June.

Jason Hollands, a director of wealth manager Tilney (owner of Bestinvest), says Woodford should at the very least consider a fee ‘reduction’ as a gesture of goodwill and in acknowledgement that many of his investors are seriously inconvenienced as a result of their money being trapped in Equity Income.

The second poorest performing fund, according to Bestinvest, is St James’s Place UK High Income that Woodford managed until he was booted out in June and replaced by managers from Columbia Threadneedle and RWC Partners.

Other so called ‘dog’ funds – in the doghouse for woeful performance – are Invesco Income and Invesco High Income that Woodford ran until he quit in late 2013 to set up his own investment company.

Is there a pattern? The second poorest performing fund, according to Bestinvest, is St James’s Place UK High Income that Woodford managed until he was booted out in June

Is there a pattern? The second poorest performing fund, according to Bestinvest, is St James’s Place UK High Income that Woodford managed until he was booted out in June

Is there a pattern? The second poorest performing fund, according to Bestinvest, is St James’s Place UK High Income that Woodford managed until he was booted out in June

Manager Mark Barnett, tutored by Woodford at Invesco, continues to focus on the undervalued companies that Woodford likes and form the backbone of Woodford Equity Income.

Bestinvest says 59 of the 702 funds it investigated merit ‘dog’ status. This label is given to any fund that records worse returns than the market it invests in for three consecutive 12-month periods – and underperforms by more than five per cent over the three years.

Bestinvest calculates that these funds are between them raking in £306million of annual management fees – charges that Tilney’s Jason Hollands describes as ‘rewards for failure’.

Hollands says that not all ‘dog’ funds should be sold straightaway although investors would be wise to assess if better investments are available. The report also highlights funds that have managed to consistently outperform their chosen stock markets.

Invesco has more poorly performing funds – six – than any other investment manager with four having a UK bent.

On Friday it said: ‘Our investment process remains robust and we continue to believe in the long term value of the UK equity market. We retain full confidence in the positioning of our UK equity portfolios.’

The report can be downloaded at bestinvest.co.uk/spot-the-dog.

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