Neil Woodford departure: Investment experts say ‘don’t panic’ but views on whether to switch vary dramatically

15th October 2013

There is no other way to describe the planned departure of Neil Woodford from Invesco Perpetual except as a huge blow to his investors writes John Lappin

Mr Woodford does not depart until April next year when he will set up a new business. That may well attract a lot of new money, but it’s the existing money which is concentrating his investors’ minds for now. It involves a huge amount of assets with £10.5bn in the Income fund and nearly £14bn in the High Income fund. The pressure is already building on the annointed successor Mark Barnett.

Mr Barnett has a very strong track record in his own fund the £284.8m Invesco Perpetual UK Strategic fund, and he has been with the Invesco Perpetual business for 17 years.

But will that assuage investors’ concerns?

Well at first look, it seems that there really is no need to panic. If you are invested in the Income and High Income funds and also the Invesco Perpetual UK Equity Pension then Mr Woodford will remain in charge for the next six months. He is not the type of character to allow his performance to flag. For cricket fans out there, there’s about as much chance of Sachin Tendulkar taking it easy in his last few Test matches.

However, some brokers, of which Fundexpert has arguably been the most vocal, have suggested switching, in Fundexperts view particularly if you have more than 10% of your portfolio in a Woodford fund.

Others have been more circumspect. Mark Dampier at Hargreaves Lansdown, and probably the most high profile investment commentator of the last two decades, says there is no need to panic and that he is keeping his own money with the funds, though the firm won’t be recommending new money.

In another very significant vote of confidence, Jupiter’s head of multi-manager and chief investment officer  John Chatfeild Roberts is maintaining his investment in the Invesco Perpetual Income fund amounting to 13.4 per cent of his £4.7bn Jupiter Merlin Income fund, though in comments to trade website Money Marketing, he also says other investors need to make up their own minds.

Those two views may steady a little of the nervousness at Invesco Perpetual’s headquarters in Henley-on-Thames, if they are concerned that money is about to flood out the door.

Clearly the most important thing about Mr Woodford has been the consistent long term performance. That is what has endeared him to his investors more than anything else and investors would like someone who will replicate this.

But in many ways, he also stands for something more fundamental. He remained a sceptic during the telecoms, media and technology boom in the late 1990s and, despite coming under intense pressure to change his mind, stood firm and won out when the tech bubble burst. He has continued, most years at least, to post consistent performance.  In fact, some occasional blips have only served to underline his ability to stick to his investment guns.

Yet, for a long time, some investment experts and advisers have worried about the size of the funds.

Big funds can be difficult to steer depending on your investment approach. Woodford has also maintained that his style suits such large funds. But people will be asking those questions all over again and this time, of Mr Barnett.

Of course, we shouldn’t feel too sorry for him. He is well paid and well qualified. With the responsibility comes a huge opportunity – the role of a lifetime.

But there will be inevitable comparisons with the succession process surrounding another fund, Fidelity Special Situations run by another star, indeed the man with whom Neil Woodford used to share top billing Anthony Bolton.

That fund was split in two, with one half focused on a global mandate, and one half on the UK.

The global fund lost one manager relatively rapidly having failed to position well for the banking crisis. The manager of the UK part, Sanjeev Shah has announced that he is stepping down in the New Year as the Telegraph recently reported, but performance has been very respectable.

Invesco Perpetual are not proposing anything as radical as splitting any funds. Trade site Fundweb points out that the performance of his UK strategic fund is better in the last five years than Woodford’s Income fund, though of course they do vary significantly in size.

It does feel as if you have time to consider what to do. And if and when Neil Woodford does launch retail funds in a new business, they’ll certainly be worth a look.

 

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