Neil Woodford has used his new found freedom to explain why he bought into a bank for the first time in 10 years.
Woodford revealed he first bought into HSBC in the middle of the last year when at Invesco Perpetual and has been adding to his stake in recent months lifting it to 2% of his £3.7 billion St James’s Place mandate.
Speaking at dinner last night hosted by Chelsea Financial Services, Woodford said: ‘I don’t have a religious aversion to banks and HSBC is undervalued.'
He added: ‘While HSBC is exposed to many of the pressures that keep me out of banks, and has done some stupid things and will probably continue to get fined, the direction of travel at the bank is clear. It is a bank that can build a capital base and reduce leverage and one I believe will pay and sustain a dividend.’
Woodford also believes the bank has learnt from its mistakes and was full of praise for its management.
‘Stuart Gulliver [HSBC chief executive] gets it and is doing a good job, it’s an ugly shift but he doing the right things.
‘The environment for banks is going to remain difficult but HSBC is much further down the path of repair, while other banks have far hard yards to go as they still haven’t cleansed their balance sheets from bad loans.’
The fact some in the room were surprised to learn Woodford had a holding in a bank a good year after he had actually bought is a reflection of how more open he has become since he launched his new fund firm, Woodford Investment Management.
Woodford described the environment at his previous employer as ‘interesting’ and vowed this new level of communication was important and would continue no matter how successful his new firm became.
‘How we communicate with the media and investors is really important. We won’t be doing what we did, we will be more open and accessible.
‘I need to balance this with managing large amounts of money but you will know much more about what I am doing. It won’t be shrouded in mystery anymore.’
Woodford said he would use tools like social media to communicate, so does this mean the man who shunned technology during the dot.com bubble is now a bull?
‘I’m neither a tech bull or bear. It’s fair to say a lot of tech companies are unbelievably attractive and not just in the biotech market.’
To demonstrate this Woodford has bought two Norwegian technology firms, one of which specialises in fingerprint technology. He is also a well-publicised backer of bid target AstraZeneca.
However, we are unlikely to see a big weighting in technology when his new Income fund launches on 2 June.
‘Throughout my career I’ve struggled to understand valuations in this sector. Yes Astra oozes technology, but it doesn’t have someone wearing jeans and a t-shirt representing it.’
Woodford also outlined the benefits of being able to create a new business from scratch in a more demanding regulatory climate.
‘It was not something I planned to do, I thought I’d see out my career at Invesco,’ he said. ‘But when I started to think about it, it was a no-brainer.’
‘On an idle Tuesday afternoon I’d talk to Craig [Newman – Woodford’s chief executive] and ask “If we are setting up an investment firm from scratch would it look like Invesco Perpetual?” The answer was “no”.
‘[So] The opportunity rose to start again and allow me to create something fit for purpose and give me the maximum time to run money. All the pull factors encouraged me to take a gamble and enter this scary new world and I am glad I did it. There’s a need for what we do and I am very focused on my job as a fund manager.’
Invesco Perpetual has seen sharp outflows across Woodford’s old income funds since he handed in his notice last October. Does he feel any remorse?
‘Invesco Perpetual manages lots of money globally and they will get over it. Invesco Perpetual will survive beyond Neil Woodford’.