People have been writing about Neil Woodford for years, his success as a fund manager has attracted the interest of financial writers and economists from the national papers and TV, so why recently has he been propelled, in investment terms, to the level of a household name?
About seven or eight years ago, the personal finance section in every Waterstones was bristling with biographies of or books by or books about Warren Buffett; the ‘sage of Omaha’ who famously refused to follow the herd and invest in anything with a .com after its name or simply any technology he didn’t understand, had become a celebrity.
Buffett’s fame and his standing was hardly anything new, ever since the 1920s and the era of frenzied over speculation that led to the Wall Street Crash, investors have become public heroes.
John J Raskob, the man who built the Empire State Building published a famous article just two months before the crash titled ‘Everyone Ought To Be Rich’ urging people to have blind faith in stocks and shares.
Raskob was perhaps the first celebrity investor, but as you can imagine, the public’s love affair with his was somewhat short lived.
Woodford, like Buffett, wisely avoided the .com boom in 2003, ignoring the short term feeding frenzy while he was running his High Income fund and the Invesco Perpetual Income fund.
In a Guardian article dating back to 2006, the working day of Neil Woodford was worlds away from the frenzy one normally associates with investing; at a quiet office in Henley On Thames, the lack of a frenetic pace and Woodford’s decisions often to ignore the pack mentality have clearly been part of his success.
In March this year he stepped down from heading his two celebrated funds to form Woodford Investment Management. His successor at Invesco Mark Barnett explained Woodford’s philosophy and strategy; to invest long term and only in companies he has absolute faith in.
Often this has meant sticking to his investment decisions when the sector or companies he has invested in have ceased to be fashionable, exciting or zeitgeisty. He is a fan of tobacco stocks and has stuck with them even when it appeared increasingly likely that there would be a smoking ban in pubs and restaurants in the US and UK.
Irrespective of the ethics of the investment, the lesson is clear, by not giving in to either greed or fear (the two prime motivators for any investor), Woodford’s investments have soared.
Some £2bn in funds were withdrawn from Invesco when Woodford left, which gives us an insight into the faith that his clients have placed in him as an investment manager; the Telegraph reported last year that £1,000 invested with Invesco would have appreciated in value by £23,000 over the course of 25 years – extremely impressive performance for investors looking to build wealth in the long term.
Many of the clients that Woodford has enriched in the past two quarter century, including fund supermarket Hargreaves Lansdown have followed him to his new venture. The new rules around fund charge transparency have created new opportunities to invest in Woodford’s fund for less.
Hargreaves Lansdown themselves are offering a commission rate on Woodford’s fund of just over one percent (a more standard rate across the industry before the new rules was about 1.5 percent).
The reduction in fees is a change that is affecting funds across the industry so this is not an act of largesse, but altogether it adds up to an interesting opportunity for investors.