The departure of Neil Woodford from Invesco Perpetual will profoundly change and evolve the UK’s fund management industry.
Running at least £33bn in UK equity mandates, he controls a fortune as big as the entire UK-based assets of BNY Mellon Fund Managers – the UK’s fourth-largest group.
There is no question UK investors detest management change. They want their financial caretakers well settled and not distracted by turmoil, so they tend to head for the exit when big managers move.
But in this case it’s an unprecedented amount of money coming into play, and it’s money that has mostly been in situ for a very long time.
Mr Woodford’s resignation will cause thousands of investors to think about parts of their portfolios that have for decades been trusted to the same ‘Steady Eddy’ fund manager.
This will lead to structural evolutions.
For example, the long-term trend of UK investors shifting into global equities rather than domestic markets will accelerate. Investors who simply haven’t really thought about it before will be turning to global equity income funds such as M&G’s Global Dividend and Newton’s Global Higher Income for the first time.
Another evolution will be a scramble by other fund managers to cater for Mr Woodford’s ultra-defensive clientele, as he will no longer monopolise the market for ‘safe’ equity investments. There will be high demand for funds with super-steady, blue-chip, low-yielding stocks.
Invesco’s sales team could be looking at grim times ahead, but other groups whose UK equity income performance is hot right now will be popping the champagne.
Artemis Income, Schroder Income and Standard Life UK Equity Income Unconstrained spring to mind.
This could also be the making of a future breed of fund management giants, not to mention Mr Woodford’s new firm. Who will now notice the £368m Unicorn UK Income small-cap fund, which is quietly reporting the best returns in the UK Equity Income sector across one, three and five years?
I predict this will also decide the titanic battle between Invesco and Prudential’s fund manager M&G for the status of biggest UK fund manager.
M&G eclipsed Invesco in April 2012 as its bond funds flew off the shelves, but Invesco regained the title in January as Mr Woodford enjoyed a stellar run.
For me the question is no longer whether M&G will regain this crown, but whether Invesco will still be bigger than all the rest in a few months’ time.
If it lost just 28 per cent of Mr Woodford’s assets it would find itself in third place behind St James’s Place, based on August asset under management figures from the IMA.
John Kenchington is editor of Investment Adviser