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Woodford Investment Management: an exclusive first look inside

Wealth Manager can reveal a sneak peek of the early marketing material for Woodford Investment Management.

After 25 years with the group, today is Woodford’s last day at Invesco Perpetual. He joins Oakley Capital Management on 1 May and the private equity firm will provide the infrastructure to allow the star manager to manage clients’ money immediately.

In this exclusive gallery, Wealth Manager reveals some of the earliest available marketing material for Neil Woodford’s new venture.

The information is raw, but it offers some tantalising clues about the likely structures of both the Citywire A-rated manager’s new fund and his new firm.

As Wealth Manager revealed in February, Woodford is to launch an equity income fund.

Despite speculation about investment trusts and private equity vehicles, the initial marketing material suggests that for now at least this will be Woodford’s only product.

Woodford will be supported by a team of four analysts, with former Bank of America Merrill Lynch director Russell Harrop the first to be identified.

The details of the fund are broadly in line with expectations, with a 4.1% anticipated yield. Capita will be the fund’s administrator.

The next slide addresses the vexed question of the fund’s launch date.

The Oakley arrangement now seems an inspired move given that the Financial Conduct Authority has yet to approve Woodford Investment Management in its own right.

Woodford Investment Management remains confident that it will imminently secure the necessary approvals, however, viewing Oakley as a back-up plan only.

On the next of the W questions, Woodford again emphasises the simplicity of the new firm.

Woodford further insists that it will not become a monomaniacal asset gatherer: it will be a ‘multi-generational business for its people’ and ‘actively engage with the wider community’.

This introduction to Woodford Investment Management stresses integrity and compliance, particularly apt the day after the Financial Conduct Authority fined Invesco Perpetual £18.6 million for risk failings linked to two of Woodford’s old funds – although there is no suggestion at all that the manager himself was involved in any of the problems, which centred on trading and disclosure.

(The HC, rather than CF, fund prefix is not believed to have any significance and reflects that this is an early draft of the marketing material.)

This is an answer to the W question least in need of one: Woodford is typically afforded the epithet ‘legendary’ and is popularly described as the country’s most famous fund manager.

Grammar pedants will note the reference to ‘our client’s money’; this is not believed to imply that Woodford will accept no more than the St James’s Place mandate.

At around £3.5 billion, though, that alone should provide Woodford Investment Management with revenues of at least £15 million from the off – enough to sustain most boutiques.

Woodford Investment Management promises ‘a fresh start’. And while Woodford is not known as an entrepreneur, this slide notes that he does have experience in ‘nurturing’ other businesses, thanks to his longstanding interest in unquoted smaller companies.

Despite the fresh start, though, investors should not expect a radical departure from Woodford’s traditional approach to fund management.

This hints at his contrarian instincts and underlines that investors should not expect him to start running a closet tracker.

(And again, grammar pedants aghast at the errant apostrophe should remember that this is an early draft of the marketing material.)

Likewise, Woodford reminds investors that nor will his fund be a short-term trading product.

Indeed, for such reasons Woodford’s approach is rare in having been lauded by the establishment at a time when finance is very much out of popular favour.

Last year Woodford was awarded the title of Commander of the Order of the British Empire (CBE) in recognition of his services to the economy in the Queen’s Birthday Honours List.

Sir John Kay, author of the Kay Review of activism and short-termism in equity investing, also singled Woodford out as an example of a sensible, long-term investor.

So what will such a sensible investor do on Twitter? Woodford has never shied from investing in start-ups, both directly in businesses like e-Therapeutics or Phytopharm and indirectly through entities like IP Group, but it remains to be seen whether he will embrace the use of social media with the fervour of a fund manager like Mark Mobius.

Wealth Manager understands that several logo designs have been considered and this is the latest iteration. Clean and modern, it will also satisfy the crucial investor constituency of people who like to know whether it’s really a W or an upside down M.

So what can Woodford hope to achieve with the new fund? The chart above is taken from Citywire Discovery and plots all the funds in the UK Equity Income sector by their long-term performance and market share.

Put simply, those highest up are the best performers over the past decade while those furthest right run the most money (the data is up to the end of September 2013, before Woodford’s funds began to suffer outflows after his departure was confirmed).

Neil Woodford is represented by the green circle in the top right, meaning he has married impressive long-term returns with a dominant market share. He managed more than double the assets in this sector of his closest competitor by market share, the Citywire A-rated pair of Adrian Frost and Adrian Gosden at Artemis.

And there is a lot of money for Woodford to collect. The chart above shows that more than £2 billion has been pulled out of the Invesco Perpetual Income fund since Woodford’s exit was announced; flows out of High Income have been more muted, but are still equivalent to almost £1 billion.

Woodford will be trusting that his new venture will pick up a lot of that cash.

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Neil Woodford
Neil Woodford
35/76 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 57.56%
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