Woodford Investment Management, the newly created asset management company will launch its first fund, the CF Woodford Equity Income Fund, on 2 June 2014. The fund has already attracted considerable investment from wealth managers St James Place who have awarded him with their £3.6bn mandate as well as previous private holders of Invesco Perpetual.
Haynes says he is backing the new venture because of manager’s track record and the continuity with the new fund and old funds in terms of investment style.
“This has not been the hardest investment decision to make given Neil Woodford’s exceptional track record,” he said.
“His Invesco Perpetual High Income fund has returned investors over twenty five times their money during his twenty five year tenure, more than double the return of the UK stock market”
“The appeal is even greater, given that long-term returns have been driven by protecting investors from the worst of stock market falls, making him one of the more conservative fund managers with which to entrust your money.”
“Woodford’s high conviction approach, mixing core UK blue chips with selective overseas stocks and a meaningful amount of unquoted stocks with high growth potential, offers investors a unique proposition that has a proven formula.”
Darius McDermott, Chelsea Financials says he will also be recommending the fund to clients.
“Neil has been on our buy-list for 20 years and has been extremely popular with our clients and it is a no-brainer and not a difficult decision to make,” he said.
“There is demand from customers for Woodford and we think Woodford’s best days are ahead of him. Just because he has changed ship doesn’t make any difference. He is an absolutely top drawer UK equity investor.”
“His style of long term, low turnover contrarian value investing will make good money for clients over time,” McDermott said.
Woodford says he will use the same investment approach in the new fund as he has done previously.
He will focus on valuation and identifying companies that can deliver sustainable dividend growth, and those that he believes will be dividend payers of the future. He will invest in a company only when he is convinced of the compelling long-term opportunity.
“I will run this new fund in the same way that I have always run money, adopting the same philosophy and the same long-term approach,” he said.
“My passion and energy have never been stronger. Woodford Investment Management has a culture and an environment that gives me the opportunity to focus on investing – and to build a business committed to its clients’ long-term interests.”
One of Woodford’s most popular funds whilst at Invesco Perpetual was the £13.6bn Invesco Perpetual High Income.
It has been a top quartile fund in the IMA UK All Companies sector over 10 years and has returned 205.98 per cent compared to a sector average of 128.78 per cent and a rise in the FTSE All Share of 134.75 per cent.
Performance of fund, sector and benchmark over 10 years
Source: FE Analytics
Haynes says the new fund’s positioning will likely be driven by Woodford’s macroeconomic views which centre on a fragile and sceptical view of the UK economy and its recovery from recession.
“He believes that interest rates will remain lower for longer than most people expect. With spare capacity still abundant, he sees little inflationary pressures and believes that deflation is a bigger threat. He expects that base rates will stay at low levels for the next three years.”
“As a result he sees sterling overvalued and believes that it is creating a real headwind for UK exporters. He also believes that the negative effect of the balance of payments deficit is being widely overlooked.”
“However, With the UK stock market close to its highest level for fourteen years, it would have been unsurprising if the naturally contrarian Woodford was not urging caution.”
The new business will also place a high emphasis on keeping costs down, the company’s chief executive Craig Newman says.
“The Fund will have a simplified pricing structure. The only fee investors will pay is the annul management charge – it takes into account the necessary charges levied to manage and administer the fund,” he said.
“We are able to keep our fees low, through the use of modern technology and encouraging investors to use fund platforms, execution-only brokers and financial advice channels, rather than buying directly from us.”
“Many investors are still needlessly paying higher fees as a result of buying directly from fund management companies in the past.”
FE Trustnet will be meeting with Woodford early next week. If you have any questions for the FE Alpha Manager, leave a comment below or email us at editorial@financialexpress.net
