Major fund brokers and rating agencies have suspended the ratings on Neil Woodford’s income funds after the manager announced he would be quitting the group.
Chelsea Financial Services, Whitechurch Securities and Bestinvest have suspended their ratings on his Income and High Income funds as the manager announced he would leave next year to set up his own business.
Darius McDermott, managing director at Chelsea Financial Services, said the news was a “major blow” for the Henley-based fund group and that he had suspended the ratings of all the funds Mr Woodford is involved with.
He added the High Income fund would be removed from his Core Selection list.
“Neil is the leader of that team,” he said. “We hold Mark in high regard but I’m not sure who else can run £33bn although of course I could be wrong.”
“At this time I would not have the same faith in any manager.”
Jason Hollands, managing director - business development and communications at Bestinvest, said: “I’m in shock.
“2013 has seen tectonic plates move in the industry with news about [Anthony] Bolton and [Richard] Buxton but this is the biggest news of all.”
“We have suspended the buy ratings on all his funds.”
Mr Hollands added the company’s research team had met Mr Barnett recently and that his and Mr Woodford’s styles were “very similar, with a high crossover of stock names between their respective portfolios”.
“In light of our rating on Mark Barnett we will be downgrading the Invesco Perpetual Income and Invesco Perpetual High Income to from 4 stars to 3 stars,” he said.
“Whenever there is a manager move it is important to reappraise the view for holding a fund.”
Gavin Haynes, managing director at Whitechurch Securities, also put the funds on hold and said that the announcement was a “shock”.
“Redemptions could be a concern,” he added.
“The fact Neil is setting up a fund from scratch which will be small and will see large inflows will be attractive rather than running £20bn which has its obvious restrictions.”
Mr Haynes added Mr Woodford’s “exceptional track record” would see him raise a lot of money if he launches a similar fund to the ones he runs presently.
He added the company held the fund on the discretionary management side of his business and had been long term holders.
“They have outlined their succession plan and Mark Barnett has got a long term track record and well known to us.”
Morningstar OBSR has also placed Mr Woodford’s two income funds and the Monthly Income Plus and Distribution funds under review. All previously held a gold rating.
Tom Stevenson, investment director at Fidelity Personal Investing, said Mr Woodford had dominated the equity income sector in the UK meaning this was a “seismic announcement”.
“One of the key attractions of Neil’s funds was his ability to protect investors’ money when equity markets fell,” he said.
“Investors looking to replace the Invesco Perpetual fund following his departure will look for a similar absolute return mindset.”
Mr Stevenson said the Artemis Income fund run by Adrian Frost and Adrian Gosden was a “strong” fund and also highlighted Michael Clarke’s Fidelity MoneyBuilder Dividend fund.
“Other UK equity income funds in the Fidelity Personal Investing Select List include Henderson’s UK Equity Income fund, which would appeal to investors looking for more mid-cap exposure,” he added.
“JO Hambro’s UK Equity Income fund delivers returns that are more volatile than its peers but its managers are proven stock pickers.”
Ken Rayner from Rayner Spencer Mills said the news raised a “number of concerns for investors” but there was “some time” before Mr Woodford left the company so a review would be undertaken before making any decisions on ratings and portfolios.
“The new managers are experienced and both have excellent records within the Invesco UK equity team and we will have the opportunity to meet with them in the near future,” he said.
“The funds will continue to retain their rating until we have had the opportunity to review the situation in full.”
