Invesco Perpetual star fund manager Neil Woodford is quitting to set up his own fund management business.
Woodford, the country’s most popular UK equity income manager, will leave Invesco Perpetual on 29 April and hand over his £13.9bn Invesco Perpetual High Income and £10.6bn Invesco Perpetual Income funds to Mark Barnett, who has been part of Woodford’s team for 17 years.
His UK equity components of the £3.8bn Invesco Perpetual Monthly Income Plus and £2.5bn Invesco Perpetual Distribution funds will be managed by Ciaran Mallon, alongside existing bond managers Paul Causer and Paul Read, with immediate effect.
Woodford says his decision to leave Invesco is based on where he sees long-term fund management opportunities.
He says: “My intention is to establish a new fund management business serving institutional and retail clients as soon as possible after 29 April.”
Invesco Perpetual has total AUM of £73bn, with Woodford running over £30bn across his various mandates.
Chelsea Financial Services managing director Darius McDermott says: “It is a massive blow for Invesco. Mark Barnett was always likely to be his successor and we hold him in high regard but nevertheless we are suspending our ratings from these funds and taking them off our buy lists.”
Blackstone Moregate IFA Tom Wilcox-Jones says: “Our initial thought was ’crikey, how many clients do we have who are exposed to him?’ But we think Mark is good and that he has his own good track record.”
Woodford has been with Invesco Perpetual for more than 25 years and has established a strong reputation over his tenure. FE Analytics shows the manager as returning 188.13 per cent over the 10 years to 14 October 2013, compared with a 119.75 per cent gain in the IMA UK Equity Income sector.
Barnett, meanwhile, has also built a strong track record since joining Invesco Perpetual some 17 years ago. Over five years to 14 October 2013, his £284.8m Invesco Perpetual UK Strategic Income fund is up 101.82 per cent, outperforming Invesco Perpetual Income’s 80.01 per cent gain.
The two managers are both known for making big calls on sectors within their portfolios and are regarded as having similar styles.
But there are also differences, with Barnett holding significantly less in healthcare than Woodford and a lot more in financials. Barnett also runs a much smaller portfolio and has been able to venture further down the cap scale to find opportunities, which has driven some of his outperformance.
Hargreaves Lansdown senior investment manager Adrian Lowcock says: “You would expect Mark Barnett to stamp his authority on any fund and you appoint a manager because you buy into what they have been good at. Investors will have to decide whether they want to back the new manager or move their money elsewhere.”
Most commentators have called for investors not to panic and to hold onto Woodford’s funds for the time being. One high-profile investor – Jupiter Asset Management head of multi-manager funds John Chatfeild-Roberts – plans to retain Invesco Perpetual Income in the £4.7bn Jupiter Merlin Income fund, where it currently has a 13.4 per cent weighting.
Chatfeild-Roberts says: “We have been happy long term holders of the Income fund and see no reason to make a hasty decision. Mark Barnett has been working with Neil for many years and is a talented manager in his own right.”
A straw poll of 200 advisers on the Money Marketing website following the news of Woodford’s departure suggests 42 per cent will stick with the funds, with another 42 per cent waiting to hear about Woodford’s new offering and the rest seeking alternatives.
Go to www.moneymarketing.co.uk for reaction and analysis on Woodford’s departure