Before the shock news that Woodford would exit Invesco Perpetual in April, £1bn Edinburgh was trading on a premium of more than 7%. Today, however, it has slipped considerably and ahead of trade resuming this morning the trust’s premium stood at 2.4%.
Such an impact is hardly surprising given the influence that Woodford, head of Investments at Invesco Perpetual, has had on the trust’s numbers. He recently celebrated his five-year anniversary at the helm of the vehicle, and over this time he has grown its share price by 160%.
Moreover, following the departure of another star investor, Richard Buxton, from Schroders, Buxton’s trust also felt the pain as investors digested the news he would move to Old Mutual Global Investors. Buxton’s open-end UK Alpha Plus fund suffered £800m in outflows during the three months following the announcement over his departure, while his Schroder UK Growth trust swung to its widest-ever discount.
Analysts at Numis said they would have been surprised if Edinburgh Investment Trust – a popular pick within the UK income and growth sector – did not follow the same fate, but they added that given the vehicle’s active board, investors might soon be told a manager beauty parade will soon take place. “The most likely outcome, in our view, is that the board will hold a beauty parade at some stage: this could involve Invesco Perpetual, Neil Woodford’s new management company, as well as other management groups.,’ the Numis team said.
They also argued that the ability to switch between fund management houses is a unique feature of investment trusts and that the board of Edinburgh is not afraid to use it, having shifted the vehicle from Edinburgh Fund Managers to Fidelity back in 2002, then to Invesco in 2008.
Woodford’s investments take strain
Moreover, they also pointed to the possible impact on other Invesco trusts, namely Perpetual Income and Growth, which is managed by Mark Barnett, who will take on the bulk of Woodford’s £30bn in assets as well as his role as head of UK equities.
“On the face of it, there are no direct implications for the other investment trusts in the stable. However, Mark Barnett’s responsibilities will be considerably expanded by the promotion/management of the Income/High Income funds,’ the brokerage said. “This brings the question
whether or not he is able to manage his existing mandates in the same way – with the ability to invest more in mid/small cap stocks.”
Some of the smaller firms that Woodford has invested in over the years could also feel the strain, particularly if investors begin pulling their money from Woodford’s £13.9bn High Income and £10.6bn Income funds. The likes of Raven Russia and Crystal Amber – where he owns close to 30% – could find their share prices under pressure, alongside his bigger holdings where Woodford also holds sizeable positions. Capita, for example, showed some early signs of this and yesterday its shares shed 3.6%. Woodford has a 22% stake in the stock.
