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Woodford exit shock: how these 10 readers reacted
on Oct 16, 2013 at 11:49
News that Neil Woodford is exiting Invesco Perpetual generated mountains of reaction from our readers. We highlight some of the comments which stood out.
Ben Gutteridge, fund analyst at Brewin Dolphin
‘We are shocked but we had planned for this because of the level of key man risk and we expected Mark Barnett to take over. We recommend his Perpetual Income & Growth investment trust and he has a fantastic track record.
‘We are not recommending clients sell because we have such a high opinion of Mark and the portfolio won’t change overnight. We also use other large incumbents such as Artemis Income and Threadneedle UK Equity Income.’
Nick Sketch, senior investment director at Investec Wealth & Investments
‘We rate Mark Barnett very highly and have done for a long time. People might have thought that he was living on someone else’s investment calls and was ‘me-too’. We are one of the largest investors in Keystone and he has been a manager on that trust for some time. We did not and do not think that we are just getting a clone or a second class version with that trust’s management. Barnett’s investment calls are similar to Neil Woodford’s because they have the same macro data, similar analysts and because the two of them agree - and they have been right. We are very comfortable with his abilities,’
Tim Cockerill, investment director at Rowan Dartington
‘Most of Woodford’s money, totally over £30billion, is invested with him because of who he is and his success. However, whether there is much outflow before investors know what he is proposing to do is harder to estimate. On the one hand, there is likely to be a very strong exodus following him to his new company - but until that is set up and investors know what he is offering, there is little reason to move. On the other hand, the size of outflow could potentially depress some the stocks values within the fund, so exiting sooner might be best.
‘Mark Barnett, who is taking over, is an excellent manger - a fact that may be overlooked in the shockwaves of the next few weeks. Look at his UK Strategic Income fund; a side step into this fund away from Woodfords could work.’
James Calder, head of research at City Asset Management
‘The fact Neil Woodford is off somewhere else rather than retiring is a challenge for Invesco Perpetual. One would imagine he’d be able to mine assets and some of that is likely to come from his current funds.’
‘But a lot of the assets in the fund have been there for a long time and will go back to PEP days and are not being actively managed by IFAs. With the best will in the world, they will see some outflows but if the funds are a bit smaller they will be easier to run for the new manager.’
Simon Evan-Cook, senior investment manager at Premier Asset Management
‘Neil Woodford’s departure from Invesco Perpetual is a blow to the firm. His track record has made him a go-to brand name for UK investors, but now he is using that brand to launch his own business.
‘In Mark Barnett, it looks like Invesco Perpetual have a capable replacement, which should provide some reassurance for existing holders. However, there have been concerns about the size of these funds, so there is a real chance that many investors use this as a chance to jump ship.
‘In respect of Mr Woodford himself, his brand is a powerful draw, and we would expect investors to be queuing down the street to gain access to his new offering, whatever that may be. I’m sure more details will emerge in the coming weeks and months, but I would not be surprised to see him run a similar product, but to limit its size. This would preserve its ability to outperform, with a likely trade-off for this being higher fees. The funds market is polarising away from poor value-for-money benchmark huggers, into either cheap trackers or more expensive, high-quality active managers. Neil Woodford would certainly be at home in the latter category.’
Harry Morgan, head of private investment management at Thomas Miller Investment
‘[Woodford is] A bit of a genius, who has always been long term and willing to go against the herd. An inspiration to his investors and to his competitors. The mighty Invesco Perpetual will of course rumble on, and there is no need for anyone to take hasty action.’
Ben Williams, investment manager at Saunderson House
‘There has long been speculation about when Woodford would step down from Invesco Perpetual so it is not that big a surprise to us.
‘Woodford’s value investment approach and long term focus on companies with strong management teams, well-known franchises and robust balance sheets has generated excellent absolute and relative returns over the long term with low volatility. However, we have always felt it difficult for him to make aggressive changes to portfolios given the amount of funds under management he currently runs.
‘We would expect to see some outflows given Woodford’s track record and investors are likely to follow him once he moves next year. However, Mark Barnett employs a similar contrarian value investment approach and we would expect performance under the new manager to be fairly similar. There is a large amount of crossover between Woodford’s Income fund and Barnett’s UK Strategic Income fund, both having large positions in Pharmaceuticals and Tobacco and eight stocks in common in the top ten. However, Barnett’s higher mid cap weightings and allocations to more cyclically-biased UK companies, combined with the fund’s more nimble size, has helped the UK Strategic Income fund to outperform Woodford’s Income fund over 1,3 and 5 years.’
Gavin Haynes, managing director at Whitechurch Securities
- ‘This is undoubtedly a massive blow to Invesco Perpetual.
- ‘Neil's funds have been the groups' flagship products and make up a significant amount of their funds under management (Income and High Income funds alone have over £24 billion invested in them).
- ‘This is news that will affect a significant number of private investors.
- ‘There is no need for investors who hold his funds to panic in the short-term. Neil is committed to running the funds for the next six months and will be keen to ensure that his exceptional track record is not tarnished.
- ‘However we would not recommend putting new monies into the Income and High Income funds following the news.
- ‘His track record is second to none over the long-term and has been driven by his personal judgment and making exceptional calls on key investment themes over the past 25 years.
- ‘It will be a big challenge for his replacement Mark Barnett, to recreate this performance especially given the scale of monies invested in these funds.
- ‘Woodford is going to set up a rival business; we would expect a lot of money to follow him, when he launches his own funds. This could be destabilising for the IP funds at that time.
- ‘In the meantime, alternative UK income funds that we would recommend include Artemis Income, Rathbones Income or Miton UK Multicap Income all have highly experienced managers.’
Brian Dennehy, managing director at FundExpert.co.uk
‘Our general view is that fund managers are caretakers. If a fund is any good, and the fund manager leaves, the fund house will find a replacement with a similar approach, who is highly unlikely to upset the apple cart.
‘If this is a sound general rule, we must always be wary of exceptions.
‘For example, if a fund manager is hugely successful simply because he is idiosyncratic, finding an adequate replacement is very difficult.
‘Neil Woodford’s success over the last 15 years has to a large extent been based on one huge bet, what we have called the biggest and longest bet in fund management history – a consistently large overweight in defensives, in particular utilities, tobacco, and pharmaceuticals. Would any other manager have had the foresight to begin this strategy? And the fortitude to continue with it over such a prolonged period? I don’t think so.’
Alan Miller, CIO and co-founder at SCM Private
‘Whatever Invesco Perpetual say publically about Neil Woodford’s departure, it creates a significant problem for them. Invesco will find it very hard to replace him with anyone without losing a large chunk of the £34 bn managed by him. The story behind the headlines is that the more money or more different types of strategy (or both) that the fund manager employs, the harder it is to beat the pack. Information is more widely available so ‘superstar’ investors are less likely to have an edge.
‘Neil’s new company will attract funds and be stunningly successful, but he will probably be managing £1bn not £34bn at the beginning so he can buy his favourite small companies and have a 1% stake rather than a 0.01% stake in them. Meanwhile the commercial maths means that whatever his stake or incentive was in Invesco he will almost certainly be much better off holding the majority of ‘Woodford asset management’.