Eagled-eyed readers might have spotted my comments on the front of the business section in the Daily Telegraph today.
On hearing about the shock resignation of Invesco Perpetual star fund manager Neil Woodford yesterday afternoon, I offered a few choice soundbites to the press.
One of these, suggesting his resignation was “potentially devastating news” for Invesco Perpetual, made it into the Daily Telegraph article and was the basis for their headline.
Now the dust is starting to settle, it is probably time for a more considered and balanced opinion on the news.
This was undoubtedly big news in the world of fund management.
Woodford was and remains a star fund manager. He currently runs six funds at Invesco Perpetual, responsible for around £30bn of assets under management.
Compare this to the £76bn of assets under management at Invesco Perpetual as a whole, and it is easy to reach the conclusion it could be potentially devastating for the firm should a large part of this cash (and its associated revenue) walk out of the door.
As head of investments at Invesco Perpetual, he is responsible for a large number of institutional mandates, as well as the popular retail funds.
His main funds, those he is most well known for, are the Invesco Perpetual High Income fund and the Invesco Perpetual Income fund.
Woodford’s long-term track record is exceptional. It looks less impressive over the short and medium terms, as demonstrated by this excellent piece of research.
According to Citywire, over the past three years Woodford has delivered total returns as a manager of 45.3%, compared to 41.1% for the average manager.
The same analysis shows that replacement manager Mark Barnett delivered better performance than Neil Woodford over the past three years; an impressive 58.5% to Woodford’s meagre 45.3%.
We know from the rather brief press release issued by Invesco Perpetual yesterday that Woodford plans to establish his own fund management business. This might or might not become a direct competitor for Invesco.
Because Woodford is considered a ‘star’ fund manager, many investors are likely to follow him to his new company. Those that do not could still choose to move to a different fund, rather than stick with their existing holdings under the management of Mark Barnett.
That said, there is no rush for investors to make a decision.
The funds will now experience a hopefully orderly transition through to the end of next April when Barnett will assume full management responsibilities.
Barnett might not have the star manager status of Woodford, but he could easily obtain it during the coming years. If recent performance comparisons are anything to go by, he certainly has the potential.
Here at Informed Choice, we are in the fortunate position of not having recommended Neil Woodford’s funds for several years. We replaced Invesco Perpetual High Income in our model portfolios back in October 2009, due to concerns about capacity constraints.
This news does not therefore have a big impact on our existing client portfolios, or leave us scrabbling to identify suitable alternatives.
Rather perversely, this announcement could make us more likely to recommend Invesco Perpetual High Income or Invesco Perpetual Income in the future, assuming they become smaller and nimbler funds due to mass investor redemptions (and assuming Invesco Perpetual as a whole weathers the storm successfully).
In any case, investors need not rush into action.
Sit back, wait and see what happens over the next six to twelve months, and make investment decisions based on satisfying your long-term financial goals, rather than knee-jerk reactions to fund manager changes.
