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Investors seek alternatives after Woodford quits Invesco

What should investors in Woodford's Invesco Perpetual income funds and Edinburgh investment trust do now?

 
Investors seek alternatives after Woodford quits Invesco

Investors were reconsidering their holdings in Neil Woodford’s giant funds after the shock announcement that he is to leave Invesco Perpetual to start his own firm.

Citywire A-rated Woodford, manager of £26 billion of investors’ money in the Invesco Perpetual Income and High Income funds and the Edinburgh investment trust, will leave Invesco Perpetual in six months’ time.

See the full story on Woodford’s exit here.

Henley-based Invesco, which has £70 billion in funds under management, may struggle to retain investors who are expected to follow Woodford out of the funds.

Selling

The reaction from investors was already evident in the share price of the Edinburgh trust which fell 5% on Tuesday, to 572p, the steepest fall of all FTSE 250 stocks.

Financial advisers and wealth managers either said they would no longer recommend investors put their money in Woodford’s funds, or that they would wait for more details of the fund manager’s plans.

Alan Sippetts, an investment director at Heartwood, said the firm was likely to sell its small position in the Income fund as a result of the news.

'My immediate reaction is that Neil Woodford is so pivotal in running that fund that I would recycle the money immediately into our staple of preferred investments,' he said. 

Sippetts’ top UK equity income picks include funds run by Majedie, Heronbridge and JO Hambro Capital Management.

‘We would expect to see some outflows given Woodford’s track record and investors are likely to follow him once he moves next year,’ said Ben Williams, investment manager at Saunderson House. 

‘However, Mark Barnett employs a similar contrarian value investment approach and we would expect performance under the new manager to be fairly similar,’ added Williams of the Invesco fund manager who is to replace Woodford on both the Income and High Income funds.

See our comparison of the performance of Woodford and Barnett here.

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12 comments so far. Why not have your say?

peter montgomery

Oct 16, 2013 at 09:57

Theres quite a lot of short-termism evident in this article.Firstly it shows the extent to which Woodford was marketed by Invesco as 'Superman' with all the attendant dangers and precidences that has set(no names mentioned!) Secondly,I dont think for a month of sundays,he was responsible for every stock and every decision that affected 'his' funds,although it might have been convenient for it to be marketed that way.The idea that one person has the time to analyse every stock is ridiculous;no,he picked out the best ideas that crossed his desk and then used that to reflect his view of global asset prices.OR,perhaps the other way round,hence some of the underwhelming decisions of the past few years -pharma,retail etc.

No doubt his share of the enormous 'performance'fee deal he cut with EIT will keep him in comfort until hes released from his contract. Shame about the EIT purchasers who paid a premium over NAV to invest in what they thought was a steady pair of hands! The message of that is avoid Hero Worship and paying any premium whatsoever.

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Rob Walker

Oct 16, 2013 at 10:36

In the financial world there are always plenty of flies around the honeypot looking for any opportunity to encourage investors to jump ship. Wherever they land there is no guarantee that the new Star Fund Manager won't move on to. The only enduring fact is that someone will make money from the investor pool.

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KENNETH WEBB

Oct 16, 2013 at 11:34

Peter is absolutely correct it ought to be a team performance. Crispin Odey whose funds have done really well compliments his analysts well.....

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David West

Oct 16, 2013 at 13:34

As ever there will be investors who act immediately by selling Neil Woodford's funds and investment trust. If they feel that is right for them that's fine in my opinion.

HOWEVER, I will be keeping my holdings in The Edinburgh Investment Trust together with the Invesco Perpetual Income fund and Invesco Perpetual Monthly Income Plus fund. It is far too early to jump ship.

Mark Barnett is a talented investment manager who in my estimation is a "Neil Woodford Mark 2" I can see no reason why it should be assumed that Mark's performance will be any less than Neil's in the investments he is taking over in six months time. The performance of the trusts and funds that he already runs is very good indeed.

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Spartacus

Oct 16, 2013 at 15:19

I held Perp High Income in the pre-Woodford days (anyone else remember Martin Arbyb?). Always aware that Woodford was a figurehead, glad he's going in a transitional and amicable way - he's not immortal and would always leave IP at some point.

Going forward Mark Barnett looks good, but some investors may have become star struck by Woodford and redeem units, but all the holdings are in large liquid companies so shouldn't cause any real problems.

Wonder what'll happen when Warren Buffet retires???

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Anonymous 1 needed this 'off the record'

Oct 16, 2013 at 17:19

Would Virgin collapse if Richard B retired tomorrow?

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PRS

Oct 16, 2013 at 20:11

I believe NW was born in 1960, thus making him 53, or 54 next year when he leaves Invesco. It doesn't seem much time to start up a new business, incurring and absorbing start up costs and making funds perform, before he then finally retires. Plenty of opportunity for him to take his eye off the ball when it is his own company because it must be likely that any new company must require more of his time to run his own company, whereas that is already in place at Invesco.

Barnett, having worked alongside NW for many many years seems to have earned an excellent reputation in his own right and I'm sure has picked up a few tips on the way.

Anthony Bolton hasn't exactly set the world alight on his return to fund management with his Fidelity Chinese Special Situations fund launched back in 2010, and that is with the backing of all the back office activities required.

So who is to say NW will be as successful as he has been with Invesco. I hope he is. I will not be withdrawing from my Invesco funds at the time being, but will obviously be watching the situation and see how Barnett does perform. I can't see why there should be any major change in investment policy with existing funds. It is not just the fundmanager, but the backup teams behind the funds, that have helped Invesco produce the popular funds they have produced.

I suppose there is the danger some of NW's existing team could follow him. We will just have to wait and see.

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judy garland

Oct 16, 2013 at 20:35

Is there not a case to be made for waiting to see how the Edin IT Board go about appointing the next Manager?

They were smart enough to get NW in the 1st place.

Is there no chance that Invesco can now have the current mandate put on notice+NWs newco allowed to pitch for it?

Im staying put + will be very interested in the Boards comments...

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MoneyObserver

Oct 16, 2013 at 20:49

Wasn't Woodford's most successful period as a fund manager when he was just that, and before he was promoted to be the Boss of Invescoe ?

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John Roycroft

Oct 19, 2013 at 10:08

When EDIN was available at a discount i doubled my holding. The words gift horse and mouth spring to mind

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Fund of Funds

Oct 19, 2013 at 13:41

Well I am not taking any chances, I have reduced my holding in Invesco High Income and exchanged for alternative Equity Income funds. My thinking is that by changing funds I will not lose out on performance and may save my funds if everyone starts to sell. This fund is too big and liquidity could be a problem. Woodford has this iconic image for investment but over the long term, his performance has not always been good. The 2008 market fall was a disaster for the fund. If we are so safe under the new manager then why have most Platforms remove it from their recommended lists. I know this is usually normal when a manager changes but it does not instil confidence. How is the new manager going to run his existing funds and this mammoth of a fund. There are so many good equity income funds out there adopting a similar format to the Invesco fund and some with different composition if you want a variation in your Equity Income funds. It is also possible that with a new manager we could see an improvement in the performance of the Invesco Income fund. From what I remember when Anthony Bolton, another iconic manager, left Fidelity, his fund had a lack lustre performance under the new manager although after some considerable time it has improved. He went to China to open a fund which turned out a disaster. Investors should also be aware that many multimanager funds which they are holding will contain Invesco Income or High Income.

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Dennis .

Oct 19, 2013 at 14:14

I wonder why Woodford is doing this? Surely he has a strong enough reputation inside Invesco that he could set up whatever sort of fund he wants and he can't personally be short of money. So why go to all the trouble and hassle of setting up a new outfit? I wonder if there is some underlying problem at Invesco such that he wants out?

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