The launch of Neil Woodford’s equity income fund is just weeks away, and a stampede of investors seems likely.
We know of Mr Woodford’s astonishing record in fund management, with returns of 1,839 per cent on the Invesco Perpetual Income fund and 2,213 per cent on the High Income over 25 years.
But will the tidal wave of money swamp any chances of him producing sparkling returns with his new venture?
Following an interview in the Sunday Telegraph recently, we know a little more about his plans. The usually media-shy manager stated that his ambition is to build a lasting business of significant size, rather than a small boutique.
That is probably just as well. However, given the potential inflows, he may be expected to produce more of an Alan Titchmarsh instant garden than an organically grown Geoff Hamilton one.
The best news for investors is that the 54-year-old intends “to be here for decades to come. A limited timescale at Woodford Investment Management has not even entered my thinking. My best years as a fund manager are in front of me”.
Despite this, I understand the reluctance of the IFAs who want to see a track record built up before investing.
However, as I see it, Mr Woodford’s plans are entirely different from some other disappointing switches, including the comeback of Fidelity’s Anthony Bolton.
Mr Woodford is sticking to territory he knows well, rather than dipping into new waters.And the pledge of longevity strikes a contrast to Bolton’s relatively short tenure in China – something that was apparent from the start.
One area that will need scrutiny is the structure of the funds and fees. The simpler and cleaner, the better.
We are told it will pay quarterly income – music to the ears of retired investors and those close to retirement. A monthly income version would be welcomed even more heartily by those investors.
Mr Woodford is one of an increasingly rare breed – a conviction investor who will ignore the latest fad if he does not like what he sees.
Neil Woodford may be expected to produce more of an Alan Titchmarsh instant garden than an organically grown Geoff Hamilton one Tony HazellHe was widely criticised for ignoring tech stocks in the late 1990s, but his strategy posted terrific returns for investors in the early part of this century while others struggled.
Mr Woodford’s funds will have their ups and downs, and the downs may come before the ups. But my money will be on them outperforming significantly in the long term.
The investment arena is a poorer place without Mr Woodford. The sooner his talents are once again at the disposal of private investors, the better.
Changing face of retirement
Paul Smee, the man who used to do the thinking for IFAs, is doing an equally provocative job with the Council for Mortgage Lenders.
His latest blog stirs the pot nicely on the pension reforms, pointing out that lenders have a stake in this, too.
How, he asks, must lenders approach lending in retirement if there is not the assurance of income from an annuity? Many would answer that most lenders appear to have washed their hands of this sector of the market anyway.
Then there is the question of how equity release will be affected. Should lenders stop treating lending into retirement and equity release separately and build better bridges between the two? I would give this a thumbs up.
He does not ask whether the ability to access all of their pension cash will persuade some to postpone seeking equity release until later in retirement. I suspect it will, and this will challenge the industry to make its products more attractive to younger pensioners.
Mortgage rules make sense
It is no surprise to see that mortgage brokers are already offering tips on how to manipulate applications.
These include redeeming store cards, credit cards and personal loans, and cancelling regular direct debits such as those to the milkman or National Lottery at least three months before applying.
The advice comes in the wake of new mortgage rules that see borrowers come under even greater scrutiny.
The extra scrutiny has upset some, but in fact it is a return to common sense. When I took a bank loan after graduating, I had to meet the manager and go through my finances.
Paying back a mortgage loan is a long-term commitment – spending a few hours thinking about their spending will not harm borrowers. However, manipulating the lending rules at the behest of brokers could.
Tony Hazell writes for the Daily Mail’s Money Mail section
