Most of Neil Woodford’s money, totalling more than £30bn, is invested with him because of who he is and his success.
However, whether there is much outflow before investors know what he is proposing to do is harder to estimate.
On the one hand, there is likely to be a very strong exodus following him to his new company – but until that is set up and investors know what he is offering, there is little reason to move.
On the other hand, the size of outflow could potentially depress some of the stocks values within the fund, so exiting sooner might be best.
Mark Barnett, who is taking over the management of the Invesco Perpetual High Income and Income funds, is an excellent manger – a fact that may be overlooked in the shockwaves of the next few weeks.
Look at his UK Strategic Income fund; a side step into this fund away from Mr Woodford’s could work – it has generated a return of 29.1 per cent in the 12 months to October 2013 against Mr Woodford’s High Income fund return of 19.45 per cent.
It is always worth considering in these situations how much of a fund’s performance is down to a particular individual and this is very hard to assess.
It is widely assumed that Mr Woodford is the driving force behind the performance of all the Invesco Perpetual income funds, but he is one of a team and team dynamics are very important in generating the final output and decisions on a fund. The assumption that it is all down to this one man is wrong.
Both the Invesco Perpetual Income and High Income funds are already on hold within the Rowan Dartington system. Mr Barnett’s UK Strategic Income remains a buy.
The Edinburgh Investment trust (managed by Mr Woodford) is also a hold, in spite of the price dipping 4.6 per cent on the news.
Investors should bide their time.
Tim Cockerill is investment director at Rowan Dartington
Which funds are affected?
•Invesco Perpetual High Income fund
• Invesco Perpetual Income fund
•Invesco Perpetual UK Equity Pension fund
• Edinburgh Investment Trust
The UK equity components of:
• Invesco Perpetual Monthly Income Plus fund
• Invesco Perpetual Distribution fund
[FOR THE TINTED BOX]
Top five performing IMA UK Equity Income funds over five years
Unicorn UK Income
Run by John McClure the £351.4m fund has topped the IMA UK Equity Income sector over the five year period to October 28 2013 with a return of 257.28 per cent compared with the sector average of 111.82 per cent. The aim of the fund is to deliver a gross yield at least 10 per cent higher than that produced by the benchmark FTSE All-Share index, with Unicorn Asset Management focusing on a traditional long term, long-only investment approach.
PFS Chelverton UK Equity Income
This £158.2m vehicle has been co-managed by David Horner and David Taylor since its launch in December 2006. The objective is to provide a progressive income stream and achieve long-term capital growth and can invest in both fully-listed and AIM traded UK equities. In the five years to October 28, the fund has produced an impressive 208.34 per cent, almost 100 percentage points higher than the sector average and has a historic yield of 4.61 per cent.
Standard Life Investments UK Equity Income Unconstrained
Thomas Moore took over the management of the £224.3m fund in January 2009 when the assets under management stood at roughly £13m. Since then he has turned around performance and has seen the fund size grow markedly. The five-year return of 204.99 ranks it third in the sector over this time frame, while recent performance under Mr Moore’s tenure also sees it secure in the third spot over both one- and three-year time frames.
JOHCM UK Equity Income
One of the largest of the non-Woodford funds in the sector, the £2.2bn portfolio is overseen by Clive Beagles and James Lowen. The majority of stocks in the fund are constituents of the FTSE 350, and the duo concentrate on stocks that generate a prospective yield above the FTSE All-Share index average. Combined with a strict selling discipline, this gives the fund a naturally contrarian style. The five-year performance highlights the benefits of this approach with a return of 178 per cent, against the sector average of 111.82 per cent.
Royal London UK Equity Income
Managed by Martin Cholwill the £534.59m fund invests solely in high-yielding UK stocks with a particular emphasis on companies with the ability to fund sustainable dividend payments. Therefore unsurprisingly the portfolio includes a number of income stalwarts in its top holdings such as HSBC, BP and Vodafone. This more traditional approach seems to have paid off in terms of performance with a five-year return to October 28 of 150.35 per cent.
