Flood of money from Invesco fund prompts fears for investors

Neil Woodford’s protégé Mark Barnett could see his flagship Invesco High Income fund rise above the regulator’s limit for unlisted stocks within the year if withdrawals continue at the same pace as in recent months, according to Telegraph Money analysis.

Investors took £750m out of the £5.7bn fund between October and December. The size of the portfolio has dropped dramatically over the past two years (see chart). It currently has 5.3pc, or £300m, invested in unlisted stocks and could breach the regulator’s 10pc limit by November if these outflows continued.

Woodford Investment Management’s former flagship fund, now called LF Equity Income, was forced to suspend dealings in June as investors similarly took cash out en masse. The failed manager could not sell his unlisted stocks quickly enough to meet demands and the portfolio breached the 10pc maximum on several occasions. Mr Woodford was given time by the Financial Conduct Authority (FCA), the regulator, to fix the issue. However, after the collapse of his business and the losses incurred by hundreds of thousands of his investors, the watchdog could be stricter in future cases and immediately enforce suspensions.

Peter Toogood of The Adviser Centre, a research firm, said a suspension was possible in Mr

Barnett’s case but the situation differed from Woodford’s as the Invesco manager would find it easier to sell his stocks as they were valued more appropriately.

Mr Barnett said his funds had sold nearly £500m of unlisted stocks since 2014 and further action would be taken if necessary. “We have extensive resources and expertise to ensure we manage our funds appropriately, with rigorous internal and independent oversight,” he added. “We have maintained an appropriate allocation of unlisted stocks through an active management process which includes independent risk management and local oversight functions.”

Andy Merricks of fund group 8AM Global said: “I do not understand why anyone would stay invested in a fund that has risks higher than what investors expect owning stocks. You don’t want to be the one turning the lights out.”