Around £1bn was pulled from the two funds in the month following the announcement, and though outflows have persisted, the graph below shows that the pace has definitely receded – particularly in the case of Invesco Perpetual Income.
Historical size of Invesco Perpetual Income
Source: FE Analytics
Mark Dampier, head of research at Hargreaves Lansdown, says that after meeting with Woodford (pictured) earlier this month, he’s certain that the manager will launch a UK equity income fund that’s very similar to the multi-billion pound portfolios he runs at Invesco.
“I fully expect him to run a fund precisely like the ones he runs now,” he said. “The fund will have to be subject to FCA approval and so obviously nothing can be announced, but I have every confidence.” Dampier thinks outflows from the two Invesco funds could be as high as 50 per cent, and expects many investors to jump on the Woodford bandwagon as soon as an official announcement has been made.
Here we ask three industry professionals whether the prospect of a new UK equity income fund run by the star manager is enough for them to commit their money to it.
Mark Dampier – Yes
Dampier, a self-confessed “Woodford groupie”, says he has every intention of buying any fund the manager launches in the coming months.
“I’ve bought him for the last 22 years – why would I do anything different?” he said. “The fund is going to be very similar to what it’s been in the past.
Dampier says Oakley Capital will facilitate anything Woodford runs and will allow him to get working as soon as he walks out of the door; however, he expects the manager to launch his own business.
Some industry experts are worried about the absence of Invesco Perpetual’s infrastructure, but Dampier remains relaxed.
“My personal view is that Neil Woodford has enough brokers and researchers outside of Invesco Perpetual to cope,” he said.
Dampier still holds Invesco Perpetual Income in his personal portfolio, which is to be taken over by FE Alpha Manager Mark Barnett in April.
If he does indeed buy a new Woodford fund, he says it will be at the expense of Barnett.
“Barnett has actually beaten Woodford recently thanks to his mid cap bias, but you’ve got to decide how much influence he has had on him,” he said.
“You can also look at this the other way and ask how good would Woodford have been without Barnett?”
“Given how long I’ve known Neil, and having stuck with him through the good and bad times, that isn’t going to change now.”
Ben Willis – Undecided
The head of research (pictured) at Whitechurch says he would be very interested in any new fund launch by Woodford and hasn’t ruled out holding it from the beginning.
He says ideally he’d want to look under the bonnet of the new operation and is currently happy with Invesco Perpetual UK Strategic Income, which he bought to replace Invesco Perpetual Income recently.
“I wouldn’t jump ship without any information, but it’s certainly an attraction,” he said. “When it comes to UK equity income, of course he’s the man, and a lot of money is going to be on his doorstep come April. In my view he has to offer an equity income fund.”
“He’s got an excellent track record so we wouldn’t have to see the new fund build a new one, and initially he’ll actually have an advantage because he won’t be running tens of billions of pounds, giving him more flexibility.”
“However, we rate Barnett very highly and since shifting out of him, his Invesco Perpetual UK Strategic Income fund has actually done better than Invesco Perpetual Income.”
FE data shows that Strategic has beaten its higher profile rival over one, three and five years, as well as over six months, but Income is still ahead over 10 years.
Performance of funds over 5yrs
Source: FE Analytics
When asked whether he envisaged being invested in a Woodford-run fund in a year’s time, Willis said it would depend on whether Barnett continues to deliver. Like Dampier, he thinks the similarity of Woodford and Barnett means that only one of the manager should be held in a portfolio.
Patrick Connolly – No
The head of communications (pictured) at Chase de Vere says that his firm wouldn’t automatically follow a manager to another firm – even in the case of Woodford.
“We don’t follow a manager until we are happy that they are happy and settled at the new firm,” he said. “We couldn’t pre-judge this right now. Our researchers would need to have a good understanding of how the fund operates, which means we’d have to wait.”
Unlike Dampier and Willis, Connolly says he would consider holding both Barnett and Woodford in a single portfolio.
“I think it’s a good way to hedge your bets,” he said. “If you’re nervous about the amount of money Barnett will now be managing or are unsure that Woodford will be able to do as well as he did at Invesco, this is a good way to play it.”
