You may have read in the press that Neil Woodford is leaving Invesco Perpetual to set up his own business in April 2014. Mr Woodford is renowned as one of the leading fund managers of his generation and is responsible for approximately £30 billion of investors’ assets. He manages several funds, including being the lead manager of the Invesco Perpetual High Income and Invesco Perpetual Income funds, and he is co-manager of the Invesco Perpetual Distribution and Invesco Perpetual Monthly Income Plus funds.
Our view is that the excellent long term performance of Neil Woodford’s funds can be attributed in the main to Neil Woodford, rather than Invesco Perpetual. Although we do not feel there is any need to panic, his departure being six months from now, the announcement is likely to result in outflows from the funds he is solely responsible for and this is likely to have a detrimental impact on performance.
Invesco Perpetual have announced that Mark Barnett will take over the management of the High Income and Income funds following Mr Woodford’s departure. Mr Barnett’s recent track record is actually superior to Neil Woodford’s, but he is responsible for significantly less than £30bn of assets. We feel there are a number of alternative, smaller and therefore more nimble funds, that we would feel more comfortable investing in. Managing such a vast amount of money can cause problems, as any significant changes within the fund’s holdings can have a significant impact on the share price of the stocks involved.
We are less concerned about the impact Mr Woodford’s departure will have on the Distribution fund and the Monthly Income Plus fund. He is not the lead manager of either of these funds, which are invested predominantly in bonds rather than equities. These two funds are also significantly smaller than the Income and High Income funds. However, we will be closely monitoring the performance of these funds.
In conclusion, we feel that Mr Woodford’s departure means that now is the time to exit the High Income and Income funds, but that the other funds he is involved in managing should continue to be held. We will be writing to affected clients shortly with our recommendation for an alternative fund.