20 May 2014

Should I ... Invest in Woodford's New Fund?

Neil Woodford managed the highly successful Invesco Perpetual High Income fund for many years. It (still) is an "equity income" fund investing in larger, mostly defensive, companies which pay a dividend.

He left Invesco Perpetual and has now launched a new equity income fund - should you follow him?

Although I am a big fan of the original fund, I will not be recommending clients go into the new one for the time being. The first reason is that, on principle, I would not recommend a fund with a short history (less than three years generally) since it has certainly not had time to prove itself in different market conditions. The second reason is that I suspect that a successful fund needs more than a successful fund manager. While Woodford may have been in a sweet spot at Invesco with great support around him, it's possible he will be distracted by setting up his own company, or that the support team will be less effective, or whatever.

So for me, there's too much risk in the new fund for the time being.

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