Schroders, Blackrock and Jupiter are all being pegged as likely candidates to inherit Neil Woodford’s frozen Income Focus fund with the former two described as being big enough to absorb the fallout from the Woodford brand.
But more obvious players in the income space like Invesco and Artemis have been deemed less likely to hold the credentials to take on the mandate.
Reports began swirling over the likely successor of Woodford’s third fund after a story published in the Telegraph quoted an unnamed high-profile City fund manager calling Blackrock and Schroders “obvious choices” to take over given they already have mandates from Link, the fund’s authorised corporate director.
Both Schroders and Blackrock declined to comment.
Style continuity
Chelsea Financial Services managing director Darius McDermott reckons Schroders and Jupiter could be favourites to pick up Woodford Income Focus.
Schroders value managers Nick Kirrage and Kevin Murphy as well as Jupiter’s Ben Whitmore have a similar value contrarian philosophy at the heart of their income fund reminiscent of Woodford’s third fund, says McDermott.
“It’s not identical. But if you’re in Woodford Income Focus, you’re likely to want continuity of style and those are the sorts of houses I think could deliver it.”
Schroders recently won Woodford’s £530m Patient Capital Trust though this will be managed by European private equity head Tim Creed and head of data insights and research innovation Ben Wicks.
Whitmore, who runs Jupiter UK Special Situations and the Jupiter Income Trust, picked up the Omnis Income & Growth mandate previously run by Woodford after his equity income fund was suspended in June.
McDermott also thinks Columbia Threadneedle could be in the running “to a lesser extent”. He says the Threadneedle UK Equity Income fund run by Richard Colwell is not an “out and out value” fund but “certainly valuations are a key part of their process”.
Threadneedle, along with RWC, was handed Woodford’s £3.5bn segregated mandate for SJP two days after Woodford Equity Income suspended.
Jupiter and Threadneedle declined to comment.
Blackrock and Schroders big enough to absorb Woodford fallout
But Adrian Lowcock, head of personal investing at Willis Owen, thinks Blackrock and Schroders aren’t immediately obvious candidates compared with the likes of Invesco, Artemis and Columbia Threadneedle which are known entities in the UK equity income market.
“Blackrock and Schroders are well known for many things but they’re probably not as high profile in the UK equity income space compared to their profile within the industry,” says Lowcock.
However, he says it could be a strategic play by Blackrock and Schroders to raise their profile in the equity income space which he says is a hard area to get into.
“They’re two groups that could easily absorb the mandate no problem,” says Lowcock. “They could easily absorb the impact and any fallout from the Woodford brand because they’re large groups. And it may raise the profile of their income proposition.”
Invesco’s ‘past history’ with Woodford
However, Lowcock thinks Invesco and Artemis are low down the list of candidates to take up the Woodford Income Focus mantle.
If Invesco inherited the mandate it would be “full circle” Lowcock says although its “past history” with Woodford is one of the reasons they are likely to stay away.
“The fact that Mark Barnett has a very similar investment style, it seems like a natural, obvious fit. But I can’t see them buying the portfolio. They probably don’t want to increase their association with Woodford.”
Barnett, who took over the Invesco Income and Invesco High Income funds when Woodford left to set up his own business in 2014, has been trying to distance himself from his predecessor since the blow-up of Woodford Equity Income given the cross-over between their unlisted holdings.
By the end of August Barnett’s £2.8bn Invesco Income fund had seen net outflows year-to-date of £477m with two fifths of those redemptions happening after Woodford’s fund was suspended in June.
At a group level Invesco has also seen investors race to the exits with the Henley-based manager suffering its worst ever outflows in September since Woodford announced he was leaving in October 2013. Across all UK-domiciled funds, investors pulled £2.1bn in September taking net Q3 outflows to £5.5bn.
Artemis would be another unlikely choice, says Lowcock, noting they have been vocal in the past about keeping funds at a manageable size. Artemis Income which is co-managed by Adrian Frost, Nick Shenton and Andy Marsh currently has £5.1bn in assets under management.
Artemis declined to comment and Invesco did not reply in time for publication.
