Will Neil Woodford’s lucky streak last?

After stepping aside from his lucrative role at Invesco Perpetual in March 2014, two months earlier than expected, Mr Woodford started his own fund management business in May 2014 in a move that shocked the industry.

His first fund – CF Woodford Equity Income Fund – attracted billions of pounds within the first few months of its launch in June last year. Given Mr Woodford’s clout within the investment sector, many investors also flocked to his latest proposition, the Woodford Patient Capital trust, which immediately became a record breaker.

But will Mr Woodford become a victim of his own success?

Having graduated from Exeter University with a degree in economics in 1981, he started working in the City at Dominion Insurance later that year. He joined Reed Pension Fund as a trainee equity analyst in 1983 and, after a spell in a corporate finance role for TSB, started managing money at Eagle Star in 1987.

The following year, Mr Woodford joined Invesco Perpetual, where he managed a host of funds including the Invesco Perpetual Income, Invesco Perpetual Monthly Income Plus and Invesco Perpetual Distribution during his more than 26 years with the firm.

His most notable achievement was the Invesco Perpetual High Income Fund which was the best-performing fund in the equity income sector under his management, turning a £10,000 investment into £230,000 over 25 years, according to Hargreaves Lansdown.

Speculation as to the nature of Mr Woodford’s departure mounted following the reprimand by the FCA

His string of successes was topped off with a CBE in 2013 for services to the economy.

However, it has not all been plain sailing for Mr Woodford.

Mere weeks after formally parting with Invesco Perpetual, the company was issued a £18.6m fine by the City watchdog for exposing investors to more risk than they had been led to expect.

Among the funds at fault were Invesco Perpetual Income, High Income and Managed Income funds – which were run by Mr Woodford right up until he left.

Speculation as to the nature of Mr Woodford’s departure mounted following the reprimand by the FCA – although Invesco Perpetual maintained that his reasons for leaving were as he stated at the time.

Patrick Connolly, certified financial planner at Chase de Vere based in Somerset, said: “The responsibility has to lie within the compliance team. Was Mr Woodford aware of the problem during his time at Invesco Perpetual, and could he have done more to prevent it? We will never know the answer to these questions, but it would be presumptuous to blame Mr Woodford for the failings.”

Many also questioned the impact the reproach would have on Mr Woodford and his ability to attract clients to his future venture.

However, fears were soon quickly dispelled following the success of his firm’s flagship fund, CF Woodford Equity Income fund, which invests primarily in UK-listed companies with the aim of providing a reasonable level of income and capital growth. According to FE Analytics, the fund has grown by 15.95 per cent since launch to the end of March this year, and by 8.55 per cent over the three months to the end of March.

The announcement of Mr Woodford’s resignation from his positions at Invesco Perpetual created a dilemma for his loyal investors. On the one hand, they could choose to follow their star fund manager who delivered fantastic returns to their investments over the years, or should they stick with the funds he left behind?

The amount of money that left the Invesco Perpetual Income fund reached £2bn in the months after Mr Woodford handed his notice in on October 2013 up until February 2014, while the Invesco Perpetual High Income fund saw more than £500m leave, according to FE Analytics.

This, according to Hargreaves Lansdown senior analyst Laith Khalaf, was due to “the man himself. While at Invesco Perpetual he had a reputation of doing his own thing, and more often than not he was right in his decisions, and rewarded his investors. When he left, and created his own firm, he was doing the same thing. It is no surprise that a lot of investors followed him there.

“If clients are looking for UK equity you will not be able to find another manager with a better record. It is a good proposition as part of a diversified portfolio.”

The high demand for shares in the Woodford Patient Capital, is testament to his pulling power.

The trust opened for subscriptions in February with the aim of investing in a diversified portfolio predominantly of UK companies both quoted and unquoted.

Initially, the prospectus for the trust set the share capital raising at £200m but raised it to £500m. It then had to raise the share capital to £800m, as the closed-ended fund’s issue was oversubscribed.

Mr Khalaf said: “These types of investments do come with a higher risk than investing in blue-chip corporations. I think Mr Woodford is a talented manager who has been doing these sorts of things for quite some time, and it is easy to see why it has attracted so much investor attention.”

Constant is a fitting word to describe Neil Woodford’s approach to investments, according to Robert Forbes, chartered financial planner at London-based Stadden Forbes Wealth Management.

He said: “His success has been down to one-part marketing and two-parts skill. He understands where there is value and how to make a fast buck in the market, adopting a systematic approach.”

Mr Woodford is not afraid to buck the trend – as when he decided not to invest in technology shares during the dotcom boom in the late 1990s, which raised a few eyebrows both within Invesco Perpetual and among his peers, according to Mr Connolly.

His stance was validated when the dotcom bubble burst in the earlier 2000s, damaging the fund managers who followed the popular strategy.

The rise of a fund manager to celebrity status within the industry is an all-too-familiar story within the investment sector

The same fate awaited Anthony Bolton, who rose to stardom within the sector because of his success at Fidelity, particularly with his Special Situations fund.

However, his reputation was slightly tarnished as a result of his relative failures of his £460m China Special Situations investment trust.

An initial surge, in which share prices rose by more than 20 per cent, gave way to a longer period of underperformance, during which prices dropped from £1 to around 70p amid the backdrop of a failing Chinese economy.

The trust, however, recovered and made steady progress in the run up to Mr Bolton’s retirement in April last year.

James Penny, investment analyst at TAM Asset Management, based in London said: “Mr Woodford is undoubtedly a talented fund manager, but investors should not get caught up in the bells and whistles. Just because a manager has delivered huge returns in the past, it is not guaranteed that the same would happen in the future.”

A spokesperson for Invesco Perpetual said: “Fund flows on high income and income funds were significantly less than some were anticipating and are stabilised. One year on, performance of both funds continue to be strong under the management of Mark Barnett, head of UK equities.”

Myron Jobson is a features writer at Financial Adviser

Key points

Neil Woodford set up his own business a year ago, after leaving Invesco Perpetual.

His most notable achievement was with the Invesco Perpetual High Income Fund, which was the best performing fund in the equity income sector.

The amount of money that was lost by the Invesco Perpetual Income fund reached £2bn in the months after Mr Woodford left.