Much has been written about the increasing dominance and size of Neil Woodford’s income funds but lately the statistics about his funds and assets have got a lot more interesting and somewhat alarming.
According to Investment Management Association, figures, it would appear that Woodford now manages more retail assets than any other UK investment house – not manager, but any other company.
Invesco Perpetual sits at the top of the IMA’s league table as of the end of December with £25.9bn in retail assets (based on funds where the minimum lump sum is £10,000 or less and where at least a third of the sales over the past three years have been retail.)
The next biggest retail investment firm is Jupiter with £14.6bn, followed by Fidelity at £13.2bn, M&G at £11.4bn and New Star with £9.8bn.
Now, of that £25.9bn, it is estimated that Woodford manages 60 per cent of those assets, running over £15bn, almost £10bn of which is in one fund alone, the Invesco Perpetual high-income fund.
Fidelity’s Anthony Bolton has been considered to be the manager with the biggest retail fund in the UK industry but even when his Fidelity special situations reached its height of £5.6bn he did not manage such a high percentage of Fidelity’s total assets.
Lipper Feri’s year-end data shows a similar story – Invesco Perpetual took in £7bn in gross sales and £3.9bn net, £2bn more than the next biggest player, Schroders.
Lipper attributes much of the inflows to the firm down to Woodford’s funds. The agency noted that, in examining sales data over the difficult final quarter of 2007, UK retail investors took one of two paths – “a flight to homegrown quality and more cautious offerings — Invesco Perpetual funds being a case in point — or they moved to more exotic offerings such as emerging markets or commodities in the hope of better returns”.
In the final quarter of last year, Invesco Perpetual continued to top both the gross and net retail tables thanks to the enduring popularity of its income and high-income funds, Lipper Feri commented.
Rounding out the top three players over this timeframe were BlackRock and M&G, which were boosted by BlackRock ML’s Gold and General fund and M&G’s Recovery fund, Lipper Feri noted.
There are still more examples of Woodford’s growing influence on the UK retail industry. Invesco Perpetual sits at the top of the entire authorised funds league table, even when institutional holdings are taken into consideration and Woodford’s stake in those is still quite high.
After years, and what seems like a decade even, of Fidelity sitting at the top of the IMA funds under management league table t has been surpassed by the predominantly retail house of Invesco Perpetual.
In examining the year-end stats, the IMA tables show that in terms of funds under management at the end of December 2007 Invesco Perpetual accounted for more than £30.4bn while Fidelity is in the number two spot with a still impressive £29.3bn.
This main table mostly consists of retail funds but does include some institutional holdings, as shown by the remaining top five players on the IMA’s list – SLTM, an institutional fund (£23bn), Legal & General (£22bn) Resolution Asset Management (£20bn) and Halifax (£18.9bn).
The Henley-based management company overcame Fidelity’s recorded figures in October, although then it was just by £45m. The rise to more than £1bn difference between the two companies took place it what has been deemed the worst two months, from a sales perspective, in recent history and most especially in retail fund history.
This widening gap is considered to be more down to Invesco Perpetual taking in more assets then Fidelity losing them.
Fidelity – as with many of the bigger investment companies, has seen relatively static sales over the past few years while Invesco Perpetual has been climbing the rankings rapidly.
The big Isa management firms have seen growing redemptions and little in the way of new money coming in the door to replace it – a fact the IMA’s chief executive Richard Saunders pointed to when he examined the combined Isa and Pep figures for 2007, where he noted they make up a decreasing portion of total industry assets.
Succession planning and capacity are obvious questions when it comes to dealing with the issue of the size of Woodford’s portfolios and mandates but there are other growing concerns.
What are the risks in having a single fund manager run such a big amount of retail money?
The influence can be startling when examined on a performance basis. Over the three months to January 21, the £9.5bn high-income fund has fallen by 6 per cent, although it remains among the top five best performers in the UK equity income sector. However, that loss equates to £600m – which is about the average fund size in the UK equity income sector as a whole.
Put another way, it is more than double that of the total retail outflows seen by the industry in December, which marked the worst month on record or it can be looked at as around a third of the entire amount that was invested in 2007’s biggest-selling sector of property funds.
Another point that fund companies will certainly be considering is where will that money go if the funds ever close to new business or if and when Woodford retires, which considering he is still under 50 could be quite a way off.