Outflows from Neil Woodford's funds look set to continue - but where will the money go?
After Neil Woodford (pictured) announced his departure from Invesco Perpetual on 15 October, it was inevitable there would be outflows from his income funds, which had assets of around £25bn.
Just two weeks later around £660m had left the £10.6bn Invesco Perpetual Income fund, while investors had pulled £420m from the £14bn High Income offering.
The figures are modest given the size of the funds and Woodford’s uniquely high profile. By comparison, Richard Buxton’s former fund, Schroder UK Alpha Plus, has nearly halved in size since he left for Old Mutual Global Investors, with £1.5bn of outflows from an original total of £3.6bn.
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Buxton’s decision to immediately name his new employer, combined with the fact he now runs a mirror of his old fund, made the decision an easy one for many.
By contrast, Woodford has said little about his new venture, except to say he will not be moving to an established fund group, instead setting up his own, as-yet-unnamed, company.
Speculation on the total outflows Invesco Perpetual will suffer looks set to continue until investors know more about his plans come next April.
The more pertinent question is where the money will go.
It seems unlikely Woodford would quit the firm to run identical versions of his old funds, the success of which partly depended on using huge scale to make sweeping changes at companies he held – BAE, Helphire and Omega being particularly memorable.
The manager has long favoured unlisted private equity, but the size of his funds has prevented any meaningful investment in this area.
Investors may therefore be faced with a difficult decision if Woodford does not launch a product in the IMA UK Equity Income sector – or, as some have suggested, not even a retail fund at all.
Rival managers will be less concerned. Royal London Asset Management’s UK Equity Income fund swelled by £150m to £710m in the two weeks following Woodford’s announcement, according to FE, with Cazenove seeing similar gains in its UK Equity Income fund.
But what has happened to the rest of Invesco’s lost £1bn? Little over half of that has flowed into funds in the Income sector.
Woodford’s departure, it seems, has been a catalyst for investors to review their asset allocations, a trend that will only intensify in the coming months.
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