Investment is famously motivated by a balance between fear and greed: Neil Woodford’s investors were in many cases in his fund because they appreciated his ability to walk the line between the two.
His flagship mandate, the £14 billion Invesco Perpetual High Income fund, has returned 208% since 1999 versus an IMA UK Equity Income return of 66%. Over that period his deepest drawdown has been -17.49% versus a peer average figure of -23.38%.
That lack of volatility was enough for many investors to forgive the fact that for much of the time within that period – particularly since the 2009 bounce – his compound annual return has run below peer-average.
Can his replacement Mark Barnett replicate those numbers? Over the last 10 years Barnett lags Woodford by 197% to 218%. He knocks the peer average of 119% out of the ring however.
Over five years – a period in which Woodford has proved resistant to much of the high market-beta momentum which has carried other managers – the situation is reversed, with Barnett returning 90% to 72% versus the peer average of 65.9%.
Over time, Barnett’s drawdown has consistently run a few basis points below Woodford’s – for instance in the depths of 2008 he recorded a maximum discreet loss of 19.89% versus -17.49%.
But equally in recent years he has consistently offered higher compound annual returns – particularly since the beginning of this year as markets have rallied hard globally.
So occasionally more return, consistently a little more risk – although given that is relative to one of the safest pairs of hands in UK equity management, that is probably not cause to start panic selling.