We all knew it was going to happen one day but when it did it still came as something of a shock.
Once Wealth Manager realised the press release informing us that Neil Woodford had resigned from Invesco Perpetual wasn't a joke, our thoughts - with some sympathy - went to his heir-in-waiting, Mark Barnett (pictured).
The challenge is immense. Citywire AA-rated Barnett, who at 43 is 10 years Woodford’s junior, has probably had more column inches dedicated to him this week than the entirety of the last few years. He is now national news.
Barnett is not daunted by being thrust into the limelight and taking on the task in hand. ‘I’m very excited by the opportunity and the challenge. It’s a big promotion for me and I accept everyone is going to be watching me now but I’m not going to behave differently,' he told Wealth Manager.
In Barnett’s favour is the fact that he has worked alongside Woodford for almost two decades. ‘I’ve worked for the team for 17 years, I’ve sat next to him and had privileged access to him, so I’m in an unique position to preserve and build on his track record,’ he says.
In this time Barnett says he has learned a number of key things from Woodford and draws on two key lessons. ‘Neil has taught me how to be objective and about the need to be patient, take a long term view and cut out the noise so you can focus on what’s valuable within a business.
‘[He has] also taught me that the best interaction with companies is always done behind closed doors, around the meeting room table.’
What makes Barnett different
Barnett’s performance in recent years suggests he has paid close attention to his mentor.
In the last five years Barnett has returned 93.8% on his Invesco Perpetual UK Strategic fund versus a peer group average of 74.9%, earning him a Citywire AA-rating and outstripping A-rated Woodford’s aggregated return of 72.3% over the same period.
Part of this outperformance was due to a higher exposure to mid-caps and while Barnett says there are plenty of similarities between his and Woodford’s styles, there are also one or two differences. ‘Neil takes a stock view on how it translates to his macro view. While I do this to a certain extent I take a more pragmatic view at the stock level,' Barnett explains.
‘I’m prepared to buy stocks which might not marry my economic view on the basis the market may re-rate that stock. Neil applied his macro view very rigorously and I’ve always felt there’s a more flexible approach.’
While Barnett’s performance statistics are compelling, the sheer scale of Woodford’s assets under management could pose a problem.
Once again Barnett does not seem to be daunted by this. ‘My stance has been to approach markets in the long term, which I’ve always done on a gradual basis. I don’t anticipate having to change that style.'
There is no guarantee Barnett will have quite as much to play with when he takes control of the fund next April with significant outflows anticipated. The matter is compounded by the fact Woodford is setting up his own fund firm, which is bound to attract large amounts of money from his followers.
‘We don’t know what the outflows will look like but we’ve done a lot of work on the liquidity profile of the fund to understand different levels of outflows,' Barnett says. 'We have plans to cope with this should it happen.’
Overnight the closest of allies will become the fiercest of competitors in perhaps what will become the biggest rivalry in the UK fund management industry. Wouldn’t it have been easier for Barnett to follow Woodford to his new firm?
‘The culture at Invesco Perpetual is exceptional and the culture for good fund management is exceptional. The resources we can throw at recruitment are among the biggest in the industry,' Barnett says 'You don’t reject these qualities.’
Message to investors
Invesco Perpetual distribution head Ian Trevers is convinced that in Barnett, the firm has the right man to fill Woodford’s shoes.
'Neil has been an incredible investor and it has been a privilege to work with him, and Mark is a natural successor to him. He has worked with him for 17 years and attended all the meetings with him. He also is in his own right a fantastic fund manager and his track record is exceptional,' Trever said.
'We've been talking to clients and they have been quick to accept that Mark is the best replacement for Neil.'
Barnett’s message to all those investors who went into panic mode when they heard about Woodford’s resignation: ‘I would urge all investors to consider my track record over the last six to seven years. I want to be judged rightly on my own performance record.’