Neil Woodford – Follow fund or fund manager?

The surreal image showing the fund manager

Investing

MoneyPlus Features Team

20th December 2013 at 12:14pm

Neil Woodford – Fund Manager

To many, fund manager Neil Woodford is the undisputed ‘king of income investing’. He currently manages the Higher Income and Income funds for Invesco Perpetual. The ‘Woodford – Invesco Perpetual’ partnership has been one of the most successful in recent times (in the region of £25bn), and it has elevated Neil Woodford to investment royalty. He’s renowned for making bold investment decisions, and his funds are major shareholders in many companies on behalf of his investors.

Given all this, it’s not surprising that the shock announcement of his decision to leave Invesco Perpetual to set up his own venture attracted such media attention.

So, what should investors do now?

Many have already made up their mind to stay loyal to Invesco Perpetual and the new manager. Mark Barnett has worked alongside Neil for 17 years and has an enviable track record in his own right. Others may leave, or have left already. And a significant portion are playing the ‘wait and see’ game.

Usually on these occasions the point of the ‘wait and see’ approach is to give the new manager a chance to prove themselves. But in this instance it may also be for those loyal to Neil Woodford to wait and see what his new venture offers.

At times like this, it’s fascinating to watch customers, commentators, analysts, advisers and pension scheme trustees making different decisions with different rationales. From our own analysis over many years, it’s fair to say that Invesco Perpetual and Neil Woodford have prepared for this eventuality extremely well. Well documented plans around succession planning and ‘what if’ scenarios were in place, and these have paid off and been deployed reasonably successfully.

Stay loyal, or leave?

For those of you in the ‘stay’ or ‘wait and see’ camps, take comfort that Neil Woodford will continue to manage his Invesco Perpetual funds until the end of his six month notice period. This period of performance will be attributed to him (the reputation of fund managers is driven by their long-term record and ratings). In addition, the new manager isn’t ‘new’, has a great track record, and Invesco Perpetual are managing this transition very professionally.

For those of you in the ‘move’ camp, you’re maybe there due to certain concerns. Are you worried about the new manager’s ability to take on the management of more funds? Or do you have reservations about the broader responsibilities of someone new being the Head of UK Equities at the same time as managing the potential outflows from the Income and Higher Income funds? For you, there are many other great Equity Income funds out there to choose from.

There are no bad decisions at this point

Looking at the other ‘fund selectors’ in the industry, some ‘fund of fund’ managers will inevitably decide to remove the fund(s) from their stable, based on uncertainty – some have already done so. It is worth making clear to investors that we don’t have significant concerns around any of the above options customers could take.

So what next for Neil Woodford? Well, I am as enthralled as everyone else on what, where when, how, and with who. Watch this space.

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