Fund industry’s ‘biggest beast’ on the prowl
Neil Woodford has long been recognised as one of the City’s leading fund managers, with a large following of loyal investors. The 53-year-old has built up a strong reputation within the UK fund management industry on the back of years of successful stockpicking and shrewd – if occasionally contrarian – investment decisions. Mr Woodford began managing Invesco Perpetual’s High Income fund in October 1988, and since then has delivered total returns of 2,191.95 per cent. This would have seen a £1,000 investment soar to £22,919.51 today. He is lauded by peers and industry experts for avoiding the TMT boom and bust of the late 1990s, and for staying clear of the banking sector in the run-up to the collapse of Lehman Brothers and the financial crisis. He has tended to favour defensive, cash-generative sectors such as tobacco and pharmaceuticals instead. "Neil has been on the right side of two of the biggest macro calls of my financial services career, which to me just shows how he stands out," says Darius McDermott, managing director at Chelsea Financial Services, a fund research group. Mr Woodford is known for picking stocks for long-term reasons rather than for short-term gains. Low portfolio turnover and long holding periods were among the reasons that Mr Woodford was last year singled out in the government-commissioned Kay report on the UK equity markets as the ideal fund manager. As his reputation grew within the industry, so did the amount of savers’ money entrusted to him. He is the biggest individual manager of assets in the UK fund management industry, with about £33bn of assets spread across open-ended funds and investment trusts. Hundreds of thousands of private investors hold money in Mr Woodford’s funds through their pensions, Isas and other accounts. Adrian Lowcock, investment manager at Hargreaves Lansdown, says: "He has a unique ability to see through short-term market momentum to identify where the long-term opportunities lie." As head of UK equities at Invesco Perpetual, Mr Woodford made headlines over his defiant stand against the planned tie-up last year between BAE Systems, the UK defence company and EADS, Europe’s biggest civil aerospace group. Advisers say recent performance of Mr Woodford’s flagship funds has been good but not outstanding. His High Income funds has returned about 75 per cent over the past five years, according to Lipper, the data provider, only just beating returns from the wider UK equity income sector. Jason Hollands, of adviser Bestinvest, says: "The news that Neil Woodford, the biggest beast in the UK equity income sector, is to leave Invesco Perpetual sets the seal on 2013 being a year of major moves among leading fund managers." In June, Anthony Bolton, one of the UK’s best-known and most successful fund managers, announced he was to retire from running the Fidelity China Special Situations investment trust, admitting it had proved more difficult to make money from China than he had anticipated. "We have seen the retirements announced for Jupiter’s Tony Nutt and Fidelity’s Anthony Bolton, the defection of Richard Buxton from Schroders to Old Mutual and the exit of Fidelity’s Sanjeev Shah from managing money," says Mr Hollands. Mr Woodford’s departure will be a significant blow for Invesco Perpetual, which is likely to see billions of pounds move to Mr Woodford when he opens his new venture in April next year. Invesco said his responsibilities would shift to Mark Barnett, a longstanding member of Invesco’s UK equities team. However, this is not likely to appease investors, according to experts, who noted that about £1.5bn followed Richard Buxton out of Schroders’ UK Alpha fund when he left. Chelsea Financial Services immediately downgraded the Invesco Perpetual High Income and Income fund to a hold following the news. It said while there was no urgent need for investors to switch out of these funds, it advised against investing any new money. The price of Edinburgh Investment Trust, which is quoted on the stock market, fell about 5 per cent following the news. "The two equity income funds have been the core of many investors’ portfolios for years now and it will be a huge blow to thousands of investors that Neil is leaving. I think you will see a lot of investors follow Neil when he launches his new venture," says Mr McDermott.