Follow star fund managers – Chelsea MD
Clients should consider investing with star fund managers such as Neil Woodford when they switch firms, as their new fund may outperform its predecessor, Darius McDermott has suggested.
Mr McDermott, managing director of London-based Chelsea Financial Services said that, in some cases, a star manager’s new fund had outperformed the old one for a variety of reasons.
He said: “The manager who has left understands the fund better than anyone who takes over and can be very hard to replace.
“The old fund may also have had to deal with significant outflows and sell holdings as a result, while new money coming into the new fund has helped drive up its value.”
In the past month, both Jason Pidcock of Newton Asian Income, and Ed Legget of Standard Life Investments UK Equity Unconstrained, have announced they are leaving their existing funds.
According to analysis by Chelsea Financial Services using FE Analytics data as of 16 June, recent history has shown new funds outperforming their predecessors, with Neil Woodford’s Elite Rated CF Woodford Equity Income approximately 4 per cent ahead of its predecessor and Philip Rodrigs’s R&M UK Equity Smaller Companies approximately 7 per cent ahead of his old fund.
Adviser view
Martin Dodd, a financial adviser with West Midlands-based Midlands Investment Agency, said: “We do follow star fund managers, but like any fund you have got to keep them under continuous review and I not blindly follow a manager.
“It is not just Neil Woodford, it is the team around him, and I have been a bit hesitant to follow because I wanted to see some track record.”
