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Jupiter's Chatfeild-Roberts: why we sold Woodford

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Jupiter's Chatfeild-Roberts: why we sold Woodford
 

Update, adds John Chatfeild-Roberts comments:  John Chatfeild-Roberts, head of Jupiter's Merlin multi-manager fund team, has revealed the thinking behind the group's sale of its £300 million stake in Neil Woodford's flagship income fund.

Jupiter's sale of the Woodford Equity Income fund from its £1.9 billion Merlin Growth, £1.7 billion Merlin Balanced and £2.7 billion Merlin Income funds, was a key contributor to the fund's heavy outflows over the last year as performance has deteriorated.

The Woodford Equity Income fund is the worst performer in the Investment Association's UK All Companies sector over the last year, down 10.7%. Investors have continued to pull their money from the fund, which has shrunk from over £10 billion to £6.6 billion.

Chatfeild-Roberts (pictured) said the team started cutting its stake in the fund in late 2015, after a strong first 18 months.

'He'd had a huge level of outperformance. We thought there was a significant likelihood of a reversion to the mean,' he said.

That trimming of the position was followed by another cut as some of Woodford's key holdings delivered profit warnings.

Chatfeild-Roberts highlighted Capita (CPI) as a particular example. Shares in the outsourcing group plunged in September 2016 as the company issued the first of what was to prove a litany of profit warnings.

Woodford has since been hit by a number of high-profile slumps in some his major holdings, such as Provident Financial (PFG), AA (AAAA) and Prothena (PRTA.O).

'As time went on, you had profit warnings. I suppose those reduced our conviction,' he said.

But he emphasised he still believed Woodford to be a good fund manager, just suffering from a bout of underperformance that all investors suffered. 'All managers go through ups and downs,' he said.

Jupiter's sale of its Woodford holding ended a 20-year investment in the manager, who Chatfeild-Roberts had backed when he had delivered stellar returns over his long tenure on the Invesco Perpetual Income and High Income funds.

The Jupiter Merlin team followed the manager when he left Invesco to set up his own fund group, Woodford Investment Management, in 2014. 

But Chatfeild-Roberts said Woodford's new working environment had also played a part in Jupiter's decision to sell.

Drawing on his own experience as former chief investment officer at Jupiter, a position he relinquished in 2015, Chatfeild-Roberts said he had concerns over Woodford role as both investor and business owner.

'We wondered whether the bandwidth was coming under pressure. We were concerned it was all too much,' he said.

Chatfeild-Roberts said selling Woodford's fund, after 20 years of the manager being a feature of the Merlin funds, had been a difficult decision.

'The thing one has got to be careful about is not to become emotionally attached to an investment,' he said. 'He has made huge amounts of money for our unit holders over a long period of time.'

The manager added he would 'absolutely' invest in the fund again. 'I think it's all about where the market is and whether you are fighting it,' he said.

'We'd have to think the market is coming round to his way of thinking.' 

Questioned over Woodford's investment in small and unquoted stocks at a Multi-Manager Forum event yesterday, Chatfeild-Roberts' colleague on the fund, manager Amanda Sillar had said they had been a concern.

But Chatfield-Roberts said it had not been an issue across the team running the funds, which also includes Algy Smith-Maxwell and David Lewis.

'We all have different opinions, but we come to a collective decision,' he said.

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