Why? Because on this date the most well-known UK equity income manager left his role at Invesco Perpetual and more than £30bn in assets under management to embark on a new venture.
Neil Woodford’s career at Invesco Perpetual spans 25 years and is famed for his controversial decision to stick with tobacco stocks in 1994 in spite of major litigation against cigarette companies in the US and to stay clear of technology stocks in the run up to the tech-bust of 1999-2000.
This contrarian approach, while having periods of underperformance – his decision to avoid banks in 2008 saw his High Income fund lose 19.4 per cent while the index gained 28.3 per cent – has certainly worked in the long term. If you had invested £1,000 in Mr Woodford’s Invesco Perpetual UK High Income fund right at the start, today you would be sitting on £23,528.73. So what now for those invested in one of the funds managed by the infamous investor?
Whitechurch Securities managing director Gavin Haynes says that those already invested shouldn’t panic just yet, but urges caution for those looking to allocate new monies.
“There is no need for investors who hold his funds to panic in the short-term. Mr Woodford is committed to running the funds for the next six months and will be keen to ensure that his exceptional track record is not tarnished.
“However we would not recommend putting new monies into the Income and High Income funds following the news. It will be a big challenge for his replacement Mark Barnett to recreate this performance especially given the scale of monies invested in these funds. Alternative UK income funds that we would recommend include Artemis Income, Rathbones Income or Miton UK MultiCap Income all have highly experienced managers.”
Delyth Richards, head of funds research at Kleinwort Benson, however, sees Mr Barnett’s appointment as Mr Woodford’s successor as an opportunity to buy.
“We may consider this an opportunity as Neil Woodford’s style is wedded to longer term holdings, and has been positioned defensively. If we move into a rising interest rate environment, Mr Barnett’s style of management could potentially be better suited,” he says. But who is Mr Barnett and how can investors be sure that their money is going to be handed to a safe pair of hands.
Mr Barnett joined Invesco Perpetual in 1996 from Mercury Asset Management and is the sole manager of a number of funds, such as the Invesco Perpetual UK Strategic Income fund and the Perpetual Income and Growth Investment Trust.
Since taking on the management of the UK Strategic Income fund in 2006, he has turned a £1,000 investment into £1,959. The Perpetual Income and Growth Investment Trust has seen £1,000 grow to £4,595.92 since Mr Barnett took the trust on in August 1999. Mr Richards adds: “Mr Barnett manages assets of more than £1bn and the performance of his Invesco Perpetual Strategic Income fund has outperformed Neil Woodford’s [Income and High Income] funds in the past four years.”
According to Adrian Lowcock, senior investment analyst at Hargreaves Lansdown, Mr Barnett favours companies with an ability to offer a growing dividend and focuses a great deal of attention on cashflows. He adds: “Mr Barnett sees himself as an investor, not a trader. He wants to buy long-term investment opportunities and then be patient, as he believes ‘value will out’. He wants to benefit from the long-term growth in cash flows and from there the associated dividend growth. Fundamentally, he believes the best long-term investments are companies able to grow their dividends.
“He expects to lose money when markets fall sharply and to underperform in sharply rising, liquidity-driven markets. Mr Barnett has beaten Mr Woodford since he took over management of the Invesco Perpetual UK Strategic Income fund, returning 49.9 per cent since January 2006 compared to Woodford’s Invesco Perpetual Income fund returning 35.3 per cent.”
While Mr Barnett will be taking on the lion’s share of Mr Woodford’s funds – Invesco Perpetual High Income and Income funds, as well as taking on the role of head of UK equities at the firm – Cairan Mallon has assumed responsibility for the equity portion in the Invesco Perpetual Monthly Income Plus and Distribution funds.
Investors, of course, have until April next year to make a decision on the incoming managers of these funds once Mr Woodford flies the Invesco Perpetual nest. It will be interesting to see what the majority decide to do.
NEIL WOODFORD: CONTROVERSIAL CALLS
1994
Tobacco stocks were under pressure following major litigation against cigarette companies. Mr Woodford stuck with them.
1999-2000
When technology stocks were booming, Mr Woodford made the controversial call to avoid them. This decision paid off as they plummeted in value at the turn of the millennium.
2008
Mr Woodford doesn’t always make the right calls, however, and his decision to avoid banks in 2008 saw his High Income portfolio lose 19.4 per cent for the year. The FTSE 100 index gained 28.3 per cent.
