Citywire for Financial Professionals
Stay connected:

View the article online at http://citywire.co.uk/money/article/a1120998

Jupiter's Chatfeild-Roberts: why we sold Woodford

Head of £6.9 billion Jupiter Merlin fund range points to profit-taking, wobbles for key holdings and working environment.

 
Jupiter's Chatfeild-Roberts: why we sold Woodford
 

Update, adds John Chatfeild-Roberts comments:  John Chatfeild-Roberts, head of Jupiter's Merlin multi-manager fund team, has revealed the thinking behind the group's sale of its £300 million stake in Neil Woodford's flagship income fund.

Jupiter's sale of the Woodford Equity Income fund from its £1.9 billion Merlin Growth , £1.7 billion Merlin Balanced and £2.7 billion Merlin Income funds, was a key contributor to the fund's heavy outflows over the last year as performance has deteriorated.

The Woodford Equity Income fund is the worst performer in the Investment Association's UK All Companies sector over the last year, down 10.7%. Investors have continued to pull their money from the fund, which has shrunk from over £10 billion to £6.6 billion.

Chatfeild-Roberts (pictured) said the team started cutting its stake in the fund in late 2015, after a strong first 18 months.

'He'd had a huge level of outperformance. We thought there was a significant likelihood of a reversion to the mean,' he said.

That trimming of the position was followed by another cut as some of Woodford's key holdings delivered profit warnings.

Chatfeild-Roberts highlighted Capita (CPI) as a particular example. Shares in the outsourcing group plunged in September 2016 as the company issued the first of what was to prove a litany of profit warnings.

Woodford has since been hit by a number of high-profile slumps in some his major holdings, such as Provident Financial (PFG), AA (AAAA) and Prothena (PRTA.O).

'As time went on, you had profit warnings. I suppose those reduced our conviction,' he said.

But he emphasised he still believed Woodford to be a good fund manager, just suffering from a bout of underperformance that all investors suffered. 'All managers go through ups and downs,' he said.

Jupiter's sale of its Woodford holding ended a 20-year investment in the manager, who Chatfeild-Roberts had backed when he had delivered stellar returns over his long tenure on the Invesco Perpetual Income and High Income funds.

The Jupiter Merlin team followed the manager when he left Invesco to set up his own fund group, Woodford Investment Management, in 2014. 

But Chatfeild-Roberts said Woodford's new working environment had also played a part in Jupiter's decision to sell.

Drawing on his own experience as former chief investment officer at Jupiter, a position he relinquished in 2015, Chatfeild-Roberts said he had concerns over Woodford role as both investor and business owner.

'We wondered whether the bandwidth was coming under pressure. We were concerned it was all too much,' he said.

Chatfeild-Roberts said selling Woodford's fund, after 20 years of the manager being a feature of the Merlin funds, had been a difficult decision.

'The thing one has got to be careful about is not to become emotionally attached to an investment,' he said. 'He has made huge amounts of money for our unit holders over a long period of time.'

The manager added he would 'absolutely' invest in the fund again. 'I think it's all about where the market is and whether you are fighting it,' he said.

'We'd have to think the market is coming round to his way of thinking.' 

Questioned over Woodford's investment in small and unquoted stocks at a Multi-Manager Forum event yesterday, Chatfeild-Roberts' colleague on the fund, manager Amanda Sillar had said they had been a concern.

But Chatfield-Roberts said it had not been an issue across the team running the funds, which also includes Algy Smith-Maxwell and David Lewis.

'We all have different opinions, but we come to a collective decision,' he said.

12 comments so far. Why not have your say?

kWIKSAVE

May 18, 2018 at 12:54

Well in 10 years' time Woodford's funds may have recovered but he seems determined as ever to plough on with a fair share of unquoted investments which, for the majority of the investors, are unsuitable because they are unlikely to sit with their risk tolerance.

report this

kWIKSAVE

May 18, 2018 at 12:56

Neil, please feel free to comment on this forum if my comments are being unduly harsh and unreasonable.

report this

gadgetmind2

May 18, 2018 at 17:45

Woodford's equity income funds have *always* had large chunks of holdings that very much weren't large/medium cap dividend income holdings. I'd be interested to know how his "tiddlers" have performed even while his larger holdings have in many cases hit the rocks.

Not that I actually care too much as I'm 90%+ passive.

report this

Bestmate

May 18, 2018 at 18:22

The crunch will come for NW when HL finally see the light and take the emotion out of their analysis on his funds.

report this

Anonymous 1 needed this 'off the record'

May 18, 2018 at 18:28

Capel Brown

report this

Greyinvestor

May 18, 2018 at 18:37

As Chatfeild-Roberts rightly explains, there are now multiple reasons not to invest in Woodford's funds and I love his polite but accurate assessment. The point about the best fund managers is that they do not revert to the mean.

report this

gadgetmind2

May 18, 2018 at 18:51

The point about unicorns is the horn on their heads, and we find as many unicorns as fund managers who don't revert to mean.

report this

FrankFrank

May 19, 2018 at 00:27

There are two points I wish to make: Firstly, please note that Chatfield Roberts, a top class FOF manager, started reducing his holdings in Woodford in 2015, 3 years ago, while IFAs never stop lecturing us on the exact opposite. Dampier recently was not alone on this and it is the same with all IFAs who write here. Undeclared conflict of interests ?

The second point is that Woodford's underperformance is not a recent hiccup, it started 10 years ago. Taking the IP High Inc and the Woodford UK Eq.Inc. funds together, he underperformed 6 years in the last 10. This is worst than average.

Once they asked Napoleon what qualities he was looking for in his generals. "I want them to be lucky" he replied.

report this

North Star

May 19, 2018 at 05:42

To my mind NW is too gung-ho in his investment strategies rather than analysis based. It's a gamblers instinct, but as bookies always win in the end I suppose his good run over the years is now over.

report this

mc2

May 19, 2018 at 10:14

Chatfeild has been very polite... What is he really saying is if NW doesn't show some results in the short term he is finished... However I think his CAPITAL PATIENT will do very well... the others funds I don't know

report this

gadgetmind2

May 19, 2018 at 15:39

I like the idea behind Patient Capital but the Industrial Heat debacle strongly suggests a lack of due diligence.

report this

Peter59

May 20, 2018 at 21:09

Hopefully in a few decades, investors will look back on all this obsession with a cult fund manager and be grateful for the creation of the ETF.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire Guide to Investment Trusts


In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.

Watch Now

More about this:

Look up the funds

  • LF Woodford Equity Income A Sterling Acc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Jupiter Merlin Balanced Portfolio
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Jupiter Merlin Growth Portfolio
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Jupiter Merlin Income Portfolio
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Invesco Perpetual Income
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Invesco Perpetual High Income
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the shares

  • Provident Financial PLC (PFG.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Capita PLC (CPI.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • 4D Pharma PLC (DDDD.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Benchmark Holdings PLC (BMKB.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Xeros Technology Group PLC (XSG.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • St. James's Place PLC (SJP.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • AA PLC (AAAA.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the investment trusts

Look up the fund managers

  • John Chatfeild-Roberts
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Amanda Sillars
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Neil Woodford
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • David Lewis
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Algy Smith-Maxwell
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

Archive

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Read more...

The Accumulator: FTSE see-saws on trade war fears

by Michelle McGagh on Jun 22, 2018 at 14:57

Sorry, this link is not
quite ready yet