The UK's most powerful fund manager, Neil Woodford, who controls assets worth £33bn and has vast stakes in many of Britain's leading companies, is to quit Invesco Perpetual and set up his own asset management business next April, in a move that has rocked the investment world.
The shock departure of Woodford, 53, is a devastating blow for Invesco Perpetual, where his funds make up nearly half of the Henley-based group's £70bn assets under management. The fees paid on Woodford's funds bring in more than £200m a year, and with a loyal base of hundreds of thousands of small Isa investors, billions of pounds is expected to follow Woodford to his new venture when it opens in April.
Woodford has in the past decade become the City's kingmaker, with the power to eject FTSE 100 bosses from their jobs, and he virtually controls Britain's tobacco companies through multibillion-pound stakes.
His funds are the biggest shareholders in 30 of the companies in the FTSE 250, and just last month he pitched into the controversy over Ed Miliband's proposal to freeze electricity prices. Woodford is the biggest holder of shares in Centrica, and he accused Miliband of "economic vandalism" and putting the country at risk of the "lights going out". Woodford is also seen as the man behind the exit of AstraZeneca's chief executive last year and made himself a significant obstacle to arms maker BAE Systems' plan to merge with Airbus parent company EADS – a plan that was eventually blocked by German chancellor Angela Merkel.
Woodford's departure has inevitably sparked speculation about the pay package he was earning at Invesco and what he might make at his new venture. If Woodford successfully manages to attract even a third of the money he manages over to his new business, he could earn £100m a year in fee income, although administering the money will chop at least a quarter out of that figure.
Patrick Connolly, of financial advisers Chase de Vere, said: "This is terrible news for Invesco Perpetual and will be a cause for concern for many investors who trust their investments and pensions with Neil Woodford. It will be impossible for Invesco Perpetual to replace Woodford with somebody of similar standing because, particularly in the world of UK equity income funds, there is nobody of similar standing."
In a statement, he said the decision to move was a personal one and that he was leaving Invesco Perpetual amicably.
"I leave the company on good terms and remain fully committed to my fund management responsibilities at Invesco Perpetual until my departure. My decision to leave is a personal one based on my views about where I see long-term opportunities in the fund management industry. My intention is to establish a new fund management business serving institutional and retail clients as soon as possible after 29 April 2014. Further announcements about the new business will be made after I have left."
Mark Dampier, head of investments at financial advisers Hargreaves Lansdown, said that while he is recommending clients remain with Invesco Perpetual for the time being, the fund has been suspended from the firm's influential "Wealth 150" buy-list, and he is telling new investors to wait until Woodford launches his new venture.
A farmer in his spare time with a degree from Exeter in agricultural economics, Woodford became the darling of financial advisers and private investors alike by achieving outstanding returns. According to Chelsea Financial Services, £1,000 invested in his High Income fund at launch in February 1988 would now be worth £22,920 – a gain of 2,192%, or double the £10,255 it would be worth if it had tracked the FTSE All Share index.
it had simply tracked the FTSE All Share index.Over the past year Woodford's performance has sagged, with his funds falling into third quartile positions, although on the more-widely recognised three-year rankings he remains close to the top of the table.
At Invesco Perpetual, chief executive Mark Armour said the company had planned for Woodford's succession "for many years". He said: "It has been a privilege for us all to work alongside him, and I understand that, after 25 years, he is ready for new challenges." Woodford will be replaced by Mark Barnett, who has worked at Invesco Perpetual for 17 years.
Alan Miller, who helped found the ill-fated New Star Asset Management and now runs SCM Private said: "Whatever Invesco Perpetual say publically about Neil Woodford's departure, it creates a significant problem for them. Invesco will find it very hard to replace him with anyone without losing a large chunk of the £33bn managed by him... Neil's new company will attract funds and be stunningly successful."
News of Woodford's departure also sent the share price of the £1.3bn Edinburgh Investment Trust spiralling, dropping from 605p to 571p in a matter of minutes after the announcement. EIT has been managed by Woodford since 2008.
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