Neil Woodford has been hailed as the ‘Pied Piper’ of fund management after the prices of a slew of minnow companies rocketed after he named them in a list of his holdings.
In July, Mr Woodford took the unorthodox step of listing all of the initial investments in his new £2.3bn CF Woodford Equity income fund. He pledged to continue to do so on a monthly basis.
The disclosure showed Mr Woodford has backed 15 companies listed on the Alternative Investment Market (Aim), the London Stock Exchange’s bourse for start-up businesses, the majority of them with market sizes of less than £200m.
Analysis of share prices from the fund’s first day of trading on June 19 and through the period in which the disclosure was made has revealed spectacular results. Almost all of Mr Woodford’s Aim picks have risen sharply in value, even as the FTSE Aim All-Share index has fallen 1.5 per cent in the same period.
Medical science venture 4D Pharma has risen by 52.9 per cent, while pallet maker RM2 International has surged 49.8 per cent.
Some of this is likely to be due to buying from CF Woodford Equity Income itself, but the stakes Mr Woodford has taken in most of the stocks represent much less than 1 per cent of the fund’s assets.
Analysts suggested that a good deal of the increase is due to other investors piling in once they had seen Mr Woodford’s portfolio.
One analyst at City broker firm Numis Securities told Investment Adviser: “People follow Neil Woodford – he is the rock star of the fund management world. If you look at the timeline of the spike in the shares of these Aim companies it’s obvious that he had an effect.”
Another analyst said there was probably some degree of investors buying up stocks highlighted by Mr Woodford and described the situation as reminiscent of the “Pied Piper of Hamelin”.
Several discussions on a forum for private share traders underscored the perceived significance of Mr Woodford’s involvement.
“Been watching this for a while, pretty much since Woodford got on board. The guy generally picks winners long term,” wrote one user in a discussion about material sciences firm Revolymer.
Revolymer’s shares have increased 14.1 per cent since the launch of the fund. In total 12 of the 15 Aim shares in Mr Woodford’s portfolio outperformed the wider market.
But not all the companies have reaped the benefits of Mr Woodford’s investment. Consultancy Utilitywise’s shares have fallen 3.1 per cent, while support services firm Redde was down 9.7 per cent.
