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Invesco Perpetual's Woodford in specie dilemma
by Danielle Levy on Feb 13, 2014 at 15:25
Invesco Perpetual remains tightlipped over whether it will allow its income fund investors the option of an in specie transfer into departing manager Neil Woodford's new income fund, as a number of fund buyers push for it.
The news comes after Wealth Manager revealed on Tuesday that star manager Woodford's new venture is readying an income fund launch for late May.
The fund will replicate the Invesco Perpetual Income fund that Citywire A-rated Woodford currently runs in terms of strategy and holdings, with an offer period running from the beginning of May through to late May. The fund manager's eponymous firm Woodford Investment Management will go live in early May.
News that Woodford will launch a replica fund has caused a number of significant fund buyers to push Invesco to allow an in specie transfer into Woodford's new fund.
They say it will alleviate any pressure on incoming manager Mark Barnett if he is faced with having to sell out of less liquid holdings on account of redemptions.
Dependent on HMRC approval, an in specie transfer could in theory enable investors to avoid a potential capital gains tax (CGT) liability if the holding is outside a tax wrapper.
One co-head of fund research at a wealth management business, who preferred to remain anonymous, said: 'It could get rid of a headache rather than Mark Barnett being forced to sell illiquid holdings. If half of the remaining unitholders redeems it will run across all holdings. If Barnett had to sell 15% of the fund's holding in Oakley Capital, for example, that would not be easy unless there is a wide margin.'
Another head of fund research said the issue had come to the fore again now that it is clear that Woodford is planning to launch a replica fund. 'Between Mark Barnett, Neil Woodford and Invesco Perpetual they are going to have to talk about this in a grown up way,' he said.
He hopes Invesco will consider offering an in specie transfer, but recognises that this could force some to transfer out when they may not have previously considered it.
'No-one is talking about what the client wants to do. Everyone is saying Mark Barnett is a great fund manager, but if you have followed Neil Woodford for 25 years you will want to transfer as cheaply as possible,' he said.
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