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Woodford v Barnett: three months on, who’s winning?

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Woodford v Barnett: three months on, who’s winning?

Easy come, easy go. Neil Woodford notched another victory for his young firm late last month, winning a £640 million Skandia mandate from his old employer Invesco Perpetual.

‘These are truly exceptional circumstances and this is no ordinary fund manager,’ explained Old Mutual Wealth’s chief executive Paul Feeney. ‘Many of our advisers and their clients chose the fund because of Mr Woodford and we have seen significantly increased redemptions since his departure.’

Skandia subsequently reversed the decision. 'What can I say but "we listened"?' asked Feeney.

That U-turn aside, it has nevertheless been a successful spell of early asset gathering for Woodford, which began with the triumph of St James’s Place awarding him £3.5 billion of money formerly managed by him Invesco Perpetual.

Hargreaves Lansdown was another major buyer swift to back Woodford, confirming that it intended to switch to him from Invesco Perpetual through its multi-manager funds.

The latest data on those strategies reveal how much the Hargreaves Lansdown multi-manager team of Citywire A-rated Lee Gardhouse, Ellen Powley, Roger Clark and David Smith has been able to allocate to Woodford.

At the end of September 2013, before news of Woodford’s departure from Invesco Perpetual emerged, the four Hargreaves Lansdown multi-manager funds focused on equities held a total of £407 million across the Invesco Perpetual Income and High Income funds. One or the other was a top 10 position in each of the four, with weightings of between 6.6% and 20.4%.

Today, neither features in any of their top 10s. The most significant fall has come in the giant £2 billion Income & Growth Trust, where the Invesco Perpetual equity income stake has dropped from above 20% to less than 2%.

That quartet of Hargreaves Lansdown funds instead now has £482 million invested in the Woodford Equity Income fund, equivalent to around a fifth of all the money currently in that fund.

Jupiter’s alignment

Jupiter’s multi-manager team has taken a different approach, running both Woodford and his former Invesco Perpetual funds – now under the aegis of – in tandem. They are both held in three of the Merlin funds, which oversee £8.1 billion between them.

‘We believe that both Neil and Mark are very talented long-term investors and are excited about the potential returns they could generate for our portfolios,’ explained John Chatfeild-Roberts, head of the Jupiter Merlin team.

Although Jupiter does not disclose the size of individual positions on a monthly basis, its half-year accounts indicate a mixed approach.

From the £1.6 billion Balanced Portfolio, the Merlin team pulled £136 million from Invesco Perpetual Income in the year ended 31 May 2014. That left it with just £22 million in that fund.

The £1.9 billion Growth Portfolio cut its Invesco Perpetual Income weighting more gingerly, from 10.6% to 8.2%, in the six months to 28 February 2014.

In contrast, the £4.6 billion Income Portfolio upped its Invesco Perpetual Income exposure from 13.5% to 14.3% in the six months to 15 April 2014.

But this was balanced by selling out of a 4.3% position in Invesco Perpetual High Income entirely, and doubling a holding in Barnett’s Invesco Perpetual UK Strategic Income fund from 1.1% to 2.2%.

Pension trustees have been more conservative, dumping the – in their eyes – untested Barnett but unwilling to commit to a newly launched fund. Royal London, for example, switched a £115 million mandate from Invesco Perpetual Income to Citywire A-rated Michael Clark’s Fidelity MoneyBuilder Dividend fund due to its ‘very similar characteristics’ to Woodford’s style. Citibank likewise replaced Invesco Perpetual with A-rated Derek Stuart of Artemis.

Discretionary managers, meanwhile, have proved more comfortable with Barnett. James Humphreys, head of research at Duncan Lawrie, is among those to have stuck with Invesco Perpetual given that the ‘very competent’ Barnett broadly shares Woodford’s philosophy and process.

Parmenion managing director Peter Dalgliesh likewise favours Barnett's lower weighting to small-caps but still more diverse portfolio.

In total, the Invesco Perpetual Income and High Income funds have nonetheless now shed almost £6 billion between them since their peak last summer, with an aggregated £19.1 billion of assets currently under management. Woodford Equity Income has amassed almost £2.7 billion since launch at the beginning of June.

And finally, what of performance in those three months since Woodford launched his fund? In that admittedly short timeframe, he has returned 3.1% compared with 1.9% from Invesco Perpetual Income.

Reflecting Barnett’s better risk-adjusted numbers over the past three years, though, he has kept a AA Citywire rating versus Woodford’s single A.

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