Is it time to dump the king of investing?

THERE is no doubt Neil Woodford is one of the country’s few ‘star’ investment managers. Over a career spanning more than three decades, he has made serious money for thousands of long-term investors who have gone on to enjoy enriched retirements as a result of his prowess. World cruises lapped up, new cars excitedly purchased and investment pots inflated – all as a result of this particular fund manager’s ability to make money for them from the stock market. More profits generated than nearly all his rivals.

But is the Woodford star that shone so brilliantly in the 2000s at investment house Invesco Perpetual finally on the wane? Has Woodford, in his late 50s and perhaps with more money than sense, finally lost his Midas touch, his investment killer instinct? Is he disappearing down a proverbial black hole? More a case of ‘was’ a star than ‘is’?

Although Woodford answers with an emphatic ‘No’ to each of these four questions – and has come out fighting in recent days (see opposite) – the charge sheet against the Oxfordshire-based fund manager is building by the month. Poor investment decisions, indifferent performance across his three funds – Equity Income, Income Focus and Patient Capital – the loss of big fund investors (Jupiter) and a financial kingdom that by his own admission could crumble to ruins in two-and-a-half years unless he quickly turns things around. Just imagine it. The fall of the Woodford investment empire.

His flagship fund, the eponymous Woodford Equity Income, is melting faster than Greenland’s glaciers as investors flee in search of better investment homes. For the past 21 consecutive months, more investors have pulled their cash from the fund than bought into it – although in Woodford’s defence, redemptions have slowed this year.

From a peak of £10.2billion in May 2017, the fund’s value has shrunk by more than a half to £4.5billion. It is a downward spiral that will take all of Woodford’s skills to arrest, although he argues the fund’s big positions in housebuilders (the likes of Barratt Developments and Taylor Wimpey) have great potential to grow provided the economy does not slide into recession. No guarantees there.

Over the past one and three years, the fund has lost investors’ money – registering losses of 5.6 per cent and 7.1 per cent respectively. They are time periods during which the FTSE All Share Index has risen by 7.5 per cent and 32.7 per cent respectively. Since launch in June 2014, Equity Income has been comprehensively outperformed by its peer group and the FTSE All Share Index – although returns are positive (plus 9.9 per cent). There is little solace to be found elsewhere in the Woodford ranks. Income Focus, a £573million fund with a mandate to generate a steady income (5p a share), is still in negative territory, with recorded losses since launch in early 2017 of nearly 13 per cent. Over the same period, the average UK equity income fund and the FTSE All Share Index have delivered positive returns.

The last piece of the Woodford jigsaw, investment trust Patient Capital, is hardly a picture of rude health. This trust, investing in minnow companies, has seen its share price fall by a fifth since launch in April 2015, although Woodford has always maintained that profits will only come to investors who are patient and play the long game (five to ten years).

So should investors in flagship Woodford Equity Income now take their losses on the chin and look for an alternative home for their money? Or should they wait in the hope of Woodford coming good – as he did at Invesco Perpetual in 2000 when his funds came out of the carnage of the dotcom bubble blowout smelling of roses?

Last week, Wealth asked leading investment experts a simple question: should investors in Woodford’s flagship fund Equity Income stick or fold?

Bar one notable exception – Hargreaves Lansdown that still includes the fund in its recommended list of top ‘wealth 50’ investment vehicles – they advised either folding or at the very least taking a long hard look at whether the fund now remains appropriate in terms of investor risk and objectives.

Dzmitry Lipski, investment analyst at Interactive Investor, says Woodford’s investment style has changed dramatically since his days at Invesco Perpetual where he built his reputation investing in large cap (essentially FTSE100) stocks. Now, he says, Equity Income has a heavy small and mid-cap bias which is not an obvious hunting ground for investors looking for income. ‘For this reason alone,’ he adds, ‘we would look for alternatives’.

Ryan Hughes of AJ Bell says he has ‘higher conviction’ in other UK equity investment managers while Ben Yearsley, of Plymouth-based Shore Financial Planning, says investors should switch out of Equity Income although he still likes Income Focus because of its income bent.

Justine Fearns, research manager at adviser Chase de Vere, says that if the fund represents a large position in an investor’s allocation to UK equities, ‘there is a strong argument for selling at least some of it’ and diversifying into other funds.

For those looking to move on from Woodford, there are alternatives. Wealth has come up with a list of other investment gurus worth considering – those renowned for generating attractive total returns and those with an income bent.