Unless you have spent the last month in a black hole you would not have failed to miss what was described by one commentator as the biggest news “ever” to grace the asset management industry. Neil Woodford’s departure from Invesco Perpetual, where he ran over half of the group’s £70bn of assets under management across various mandates, has lead to several questions as to just how the group will cope when he leaves come April next year to set up his own fund management business.
However while of course it would be wrong not to see the income guru’s departure as a massive blow to business, it would be wrong to think Invesco Perpetual has not been preparing for such an event.
Fund Strategy’s last focus on Invesco in July last year was headlined When Invesco’s Perpetual’s Superstars Leave the Stage and looked at the challenges of diversifying the business away from the names that had made it great. So what better time to see how far it had got down the road as its main star of the last 25 years readies himself for the exit door.
Such is the size of Woodford’s High Income and Income funds he is essentially running some 41 per cent of the entire assets in the IMA UK Equity Income sector. So it is no great surprise that his departure has sparked a frenzy of excitement among other UK equity income providers looking to hoover any assets that might leave Henley’s doors.
In July last year Invesco Perpetual’s head of distribution Ian Trevers used a football analogy of Manchester United managing to stay great through several player changes when it came to the challenge of surviving a big name departure, so does he think Invesco Perpetual can stay great when Neil leaves in April?
“Football analogies are always dangerous but behind this is something we really believe,” says Trevers. “There are organisations whereby over an extended period certain individuals have played a large role helping define that business. However importantly there is more to the business than just those individuals. Some companies are good at attracting, developing and helping the best people to reach their potential. At Invesco Perpetual we have a great record of doing this and frankly we should celebrate that Neil has been here for 25 years and done an incredible job for investors.
“The question that matters now though is what next? We have known for a long time here that within Mark Barnett we have the right answer. He has been working here and with Neil for 17 years and has a great track record. Also we have managed these situations before with the transition of the chief investment officer duties from Bob Yerbury, who was identified with the business for a long period of time, to Nick Mustoe. So these situations are not entirely unmanageable and great organisations find a way to manage them.”
In the last focus in July three names muted as possible Woodford successors, Stephen Anness, Martin Walker and Barnett. In time period since, in January this year Anness moved across from managing the UK Aggressive fund to the Global Equity fund, with Walker taking over as manager on UK Aggressive and managing UK All Companies money. As such Trevers says it was Barnett, manager of the £296m Invesco Perpetual UK Strategic Income fund, who from the three mainstay UK equity managers who worked with Woodford for the last decade or so who stepped forward as his “the natural successor”.
Mustoe adds: “The team are very close knit and Mark has a very similar investment approach to Neil in that it is very focused, long-term, low turnover and is focused on companies that will deliver cash flows and shareholder value. He is of course his own man and they do have their differences but he has always been the clear successor for Neil and has a great track record, beating Neil over the last five years. He has all the attributes you want and he also has a very strong team around him which says something about the culture we have at Henley.”
Moving away from Woodford, Trevers says another challenge for the business is responding to changes in demand and making sure it has products in all the right areas.
“This is something which has been central to the longevity and the success of the Invesco Perpetual franchise,” he says. “During the last decade we have built a hugely successful fixed income franchise under Paul Causer and Paul Read. Before their arrival this was an equities business so credit to Bob Yerbury for bringing the fixed income piece along as he understood the way the marketplace was changing knowing retail investors wanted more fixed income.
“This is what we are now looking to do with the multi asset side of our business. In the same way you need to build succession plans for your managers, you also need to manoeuvre your business towards the areas where demand is. I am on record for a long time saying the most successful investment management businesses will need to be successful in multi asset post RDR. With the hiring of the GARs team from Standard Life Investments I do not think we could have made a clearer statement of how serious about success we are in this space.”
Trevers says: “With both Global Targeted Return and the global funds we are really hoping to build two new legs to the business. The result will be that in five years time we will have a great UK equity income business, fixed income remains important and global and multi asset will become big parts. In five years we will have been more successful in some areas than in others, that is the nature of the business but what myself and Nick are focused on in terms of the business is ensuring we are giving ourselves opportunities to be market leaders in multiple areas.”
The perception that Trevers is most keen to correct is that Invesco Perpetual is only a UK equity income franchise and only about one manager.
Of course losing Woodford was huge and would be a massive blow for any fund management group. However given how the Henley group is going on about building new legs to its business and given the strength of some of the names still there, it is a blow it can seemingly take on the chin.
Source: Fundweb. Read full article here.