Few fund managers can hope to make the front page of the Financial Times when they change jobs, but Neil Woodford—arguably Britain’s most celebrated fund manager—recently achieved that. Woodford’s decision to leave Invesco Perpetual, his home for 25 years, to set up on his own was huge news for Britain’s retail investors, many thousands of whom have entrusted their money to him on the basis of his outstanding long-term record.
Woodford manages some £33bn, more than any other fund manager in the UK. Since his surprise announcement, there has been great speculation that huge sums will be withdrawn from Invesco in order to follow him to his new outfit. If that happens, the interesting question is what these investors will be buying into, and Woodford’s record could be revealing here.
His funds are best known for investing in very large companies capable of producing both capital growth and a rising stream of dividend income. He has tended to move into and out of industries when he believes he can see a mismatch between their medium and long-term prospects and their present market valuation. Once in, he tends to stay put—by the time he famously sold his shares in water utilities in 2010 he had been a leading investor in the industry for nearly 20 years.
As an approach, this is easy to understand and perfectly possible for a committed DIY investor to emulate, although for most people it has made more sense to buy into one of his funds and let Woodford and his team do the hard work.
But in recent years, he has also been doing something rather less obvious. Alongside his holdings in vast blue chip companies such as British American Tobacco and GlaxoSmithKline, Woodford has built up an altogether different set of investments in small companies, many of them technology-led start-ups and some of them not yet listed on a stock market. For example, Invesco is a significant investor in a private business called Oxford Nanopore, which has developed a cheap gadget for gene sequencing.
“We have come in as patient, long-term investors,” Woodford said last year. “We are prepared to see Oxford Nanopore grow into a large, independent company. On so many occasions, the great technology being developed in our universities has not got funding. Then the technology—and its financial upside—has leaked abroad.”
This statement is striking, to my mind, because it suggests an agenda beyond that of your typical fund manager. This is the sort of thing that someone charged with safeguarding Britain’s industrial future—a state-backed venture capitalist, for example—might say. And given the number of such investments Woodford has now made, one wonders whether some at Invesco might have been growing uncomfortable at seeing the firm cast in this light. His stated reason for starting up on his own is that mainstream fund management in the UK is not sufficiently long term in its view. Could that be an implicit barb against his current employer?
My guess is that those who follow Woodford should be prepared to see him invest their money both in big, established companies they are familiar with and in some smaller, more high-risk ventures that may never grow up. That may be too uncomfortable a combination for some—particularly if they feel they are underwriting Britain’s industrial policy instead of trying to make low-risk profits. It makes sense to me—my own portfolio resembles an idiosyncratic large-cap fund with a venture capital arm attached, and I wouldn’t have it any other way—but I wonder whether most people who’ve been investing with Neil Woodford realise that that’s what they’ve been doing
Woodford manages some £33bn, more than any other fund manager in the UK. Since his surprise announcement, there has been great speculation that huge sums will be withdrawn from Invesco in order to follow him to his new outfit. If that happens, the interesting question is what these investors will be buying into, and Woodford’s record could be revealing here.
His funds are best known for investing in very large companies capable of producing both capital growth and a rising stream of dividend income. He has tended to move into and out of industries when he believes he can see a mismatch between their medium and long-term prospects and their present market valuation. Once in, he tends to stay put—by the time he famously sold his shares in water utilities in 2010 he had been a leading investor in the industry for nearly 20 years.
As an approach, this is easy to understand and perfectly possible for a committed DIY investor to emulate, although for most people it has made more sense to buy into one of his funds and let Woodford and his team do the hard work.
But in recent years, he has also been doing something rather less obvious. Alongside his holdings in vast blue chip companies such as British American Tobacco and GlaxoSmithKline, Woodford has built up an altogether different set of investments in small companies, many of them technology-led start-ups and some of them not yet listed on a stock market. For example, Invesco is a significant investor in a private business called Oxford Nanopore, which has developed a cheap gadget for gene sequencing.
“We have come in as patient, long-term investors,” Woodford said last year. “We are prepared to see Oxford Nanopore grow into a large, independent company. On so many occasions, the great technology being developed in our universities has not got funding. Then the technology—and its financial upside—has leaked abroad.”
This statement is striking, to my mind, because it suggests an agenda beyond that of your typical fund manager. This is the sort of thing that someone charged with safeguarding Britain’s industrial future—a state-backed venture capitalist, for example—might say. And given the number of such investments Woodford has now made, one wonders whether some at Invesco might have been growing uncomfortable at seeing the firm cast in this light. His stated reason for starting up on his own is that mainstream fund management in the UK is not sufficiently long term in its view. Could that be an implicit barb against his current employer?
My guess is that those who follow Woodford should be prepared to see him invest their money both in big, established companies they are familiar with and in some smaller, more high-risk ventures that may never grow up. That may be too uncomfortable a combination for some—particularly if they feel they are underwriting Britain’s industrial policy instead of trying to make low-risk profits. It makes sense to me—my own portfolio resembles an idiosyncratic large-cap fund with a venture capital arm attached, and I wouldn’t have it any other way—but I wonder whether most people who’ve been investing with Neil Woodford realise that that’s what they’ve been doing
