The FE Alpha Manager’s decision to set up a new business and launch an equity income fund in the same mould as Invesco Perpetual Income and High Income has garnered huge interest from the investment community, but some fear that losing the huge pool of resources at Invesco could hamper the star manager. FE Research’s Rob Gleeson and Three Counties’ Andrew Alexander have both voiced concerns recently, with the former arguing that he’s happy backing Invesco’s Mark Barnett rather than a new, unproven venture.
However Woodford (pictured) says these concerns couldn’t be further from the truth, arguing that the team structure at Invesco actually but him and his funds at a disadvantage.
"The rest of the team at Invesco were running money in their own right – they weren't all helping me,” he said.
“We worked together as a team and discussed research, companies and the macro, but the infrastructure wasn't geared around me.”
Among Woodford’s UK equities team at Invesco Perpetual were FE Alpha Manager Mark Barnett and Martin Walker, and Ciaran Mallon. At the time of Woodford’s resignation in October 2013, the three managers ran 11 open and closed-ended funds between them, with combined assets under management (AUM) of over £7bn.
“The people I have recruited [for Woodford Investment Management] are not running their own portfolios but working for me. The infrastructure is far more supportive now than I had before," Woodford added.
Among the individuals recruited by Woodford include former director of global equity sales at Bank of America Merrill Lynch Russell Harrop, former Invesco Perpetual fund manager Stephen Lamacraft, and former Invesco analysts Saku Saha and Paul Lamacraft.
Woodford says that identifying individuals with a natural flair for investment has been a priority, insisting that university education and industry-standard qualifications are low down in his priorities.
Two of his latest recruitments include a former policeman and army officer, who have been out of the financial services industry for a number of years.
The manager had an outstanding career at Invesco Perpetual, leading the flagship Income and High Income funds to the very top of their IMA UK Equity Income sector during his quarter of a century at the firm.
A £10,000 investment in the High Income fund when he started in February 1988 would have been worth almost £250,000 when he handed over the reins to Barnett in March this year. Over the same period, the same investment in the FTSE All Share would have garnered £109,202.
Performance of fund and index 1988 – 2014
Source: FE Analytics
Neil Shillito, director of SG Wealth Management, agrees that worries over infrastructure at Woodford Investment Management are overstated, but doesn’t necessarily agree with the reasons the manager gives.
“I wouldn’t say his leaving Invesco from a resources point of view is a concern, no,” he said.
“What I would say is that those on his team would have said that they worked for Woodford. Invesco may have been paying their wages, but it’s very much a team environment over there and I wouldn’t be surprised if much of their bonus was based on performance overall.”
“Having said that, Woodford is obviously a phenomenally experienced manager, and has all the access he needs to analysis and research.”
“I don’t see how his leaving will make much difference. If it was a manager with only five years’ experience I think it would be an issue, but he’s been around the block so many times that I don’t think he needs a big company behind him.”
Woodford was forced to run his SJP portfolios, including the £1.3bn SJP High Income fund, for a short period from home following his exit from Invesco in March. This certainly didn’t have any impact on performance; FE data shows the fund is a top-quartile performer in its sector year-to-date, with returns of 5.84 per cent.
Performance of fund, sector and index in 2014
Source: FE Analytics
Shillito adds that Woodford’s access to company management is second to none in the industry, meaning that losing Invesco’s name has little bearing on his relationships.
The manager says his decision to leave Invesco Perpetual to set up a new business was too good an opportunity to turn down, and believes that it will put him in an even better position to deliver strong returns to his clients.
He says transparency is at the very forefront of his priorities, insisting that he will be much more visible in communicating his views and activities to investors.
“An opportunity arose for me to set up a fund management business from scratch, which I knew would allow me to utilise certain things that you can’t get at a large bureaucratic company,” he said.
“If starting from scratch, would I want a business to look like Invesco Perpetual or any other [large asset management business]? No. Regulation has changed and we have the technology that allows us to communicate much better with our clients.”
“This has allowed us to make something that is fit for purpose and made to measure.”
Woodford says the smaller volume of paperwork will allow him to do what he does best – invest in stocks that he deems to be undervalued over the long-term.
“All I want to think about is which stocks I want to buy and don’t want to buy. It’s a very intensive process, and paperwork eats into a lot of key thinking time.”
“I’m raring to go and looking forward to the future,” he finished.