The recent launch of an offshore feeder for the Woodford Equity Income Fund and its ubiquitous manager Neil Woodford has followed on from the firm passing its third anniversary of launch earlier this year. Craig Newman, chief executive, Woodford Investment Management told Gary Robinson about the company’s outlook for the future while looking back at what they have acheived.
“It’s been hard work as you’d expect but we have done what we set out to at the beginning in launching an asset management business built on a philosophy of transparency and simplicity.”
So says Craig Newman, chief executive, Woodford Investment Management, in explaining the targets that have been reached thus far for both the company and its namesake fund manager Neil Woodford – probably the best known fund manager individual in the UK, and set to become known to many more investors globally.
Describing the biggest challenges that he has faced in his three years in the chief executive role and what challenges he believes the company faces in 2017, Newman is confident to a tee.
“Our infrastructure had to be robust from the beginning. We spent hours upon hours in meeting rooms walking through FCA-submission documenta- tion, going line by line, constructing it to be right for our business – it’s a long process and, as you’d expect, there are no shortcuts,” he says.
Another way Woodford IM staked out different ground came in April this year, when the company introduced a remuneration policy based on salary only and no bonuses – including for Neil Woodford. The firm decided to delay release of the news for some months, but when it did industry cages were rattled.
The move has been deemed a success, very much “business as usual”, as staff were consulted on the scheme. Speaking at the time of the announcement Newman said the move was based on some serious statistical evidence that supported a move away from bonuses, leading to calls from some quarters that other asset management houses follow its lead. It is perhaps no surprise that many chose not to follow.
Brexit has dominated this year’s investment story, and nearing the end of 2016 the question becomes how this has impacted in the performance of both the product and business generally – given that it is located in the UK.
The answer is that Neil Woodford has been vocal that Brexit has not affected the business, and that from a portfolio view nothing changed – similarly with the recent election of Donald Trump as the next US president.
Many of the greatest economic challenges being faced now and in future dwarf the economic issues associated with the Brexit outcome, he has suggested. This also helps explain why he has not amended the portfolio strategy since launch.
That said, the fund performance has been uncharacteristically up and down in 2016. The company’s line is simple: its significant weighting towards the healthcare industry has weighed on performance for much of the year, as the market fretted about the prospect of a Clinton presidency and what that may mean for pricing, particularly of medicines sold in the key US market.
Now the US election outcome is known, the prospect of drastic pricing legislation is off the agenda.
Taking the long-term view, Woodford’s strategy means that he will suffer periods of underperformance, particularly as his funds look very different to the index.
However, on the upside he was one of a few managers to benefit from a performance upturn since Brexit.
Uncertainty can bring opportunities, as a company Woodford IM often finds it is reacting with a polar opposite response to the market on profit warnings. However as long as it can retain confidence in the fundamental long-term investment case, it says that it will take any panic selling as an opportunity to capture more long-term upside potential.
With the offshore release, the company points out that Neil Woodford has long had support from wealth managers based in the Channel Islands and Isle of Man, and other clients domiciled outside the UK. It was always part of the strategy to consider an offshore feeder fund and now seems an appropriate time given the period of performance to show for the onshore fund.
Looking from the outside in, the company appears a ‘progressive’ asset management house with the traditional shirt and tie not enforced, the clever use of blogs, no bonuses, an office outside the City – all differentiators.
Openness and transparency has been placed at the heart of the corporate cul- ture, while the firm describes itself as ‘agile’ and being flexible and executing decisions quickly. Staff are encouraged to challenge the status quo.
So what will 2017 hold and what else can investors expect from Woodford Funds? Newman reiterates the company’s stance and it is clear that this is a long-term philosophy that will not waver.
“We are continually evaluating our options, but as we said at launch (and since) we will not be launching a fund for product’s sake,” says Newman. “It is about finding the right opportunity. Our plan is to build a large-scale asset management business.”