Woodford's way: The path to market success
The Invesco chief has a winning investment formula that he has stuck to, ignoring temporary crazes such as dotcom
Sunday 03 February 2013
Neil Woodford, the manager of the Invesco Perpetual High Income fund, is celebrating 25 years in the job. You may think, so what? But if you have money in a private pension or in a fund of funds it's fairly likely that a portion of it is invested in Mr Woodford's massive fund.
He has a very simple philosophy: buy sound, high-yielding companies and hold them at the core to give a good base of regular dividend growth of the fund, while exploring smaller firms – he has up to 20 smaller companies in his portfolio – to add a little spice at the edges.
And Mr Woodford's formula, which is one I would recommend to any private investor looking to construct a solid long-term portfolio, pays dividends, quite literally.
He is a major figure in the world of investment and other fund managers sit up and notice when he takes a stake in a company. The thinking is "what has he seen and what are we missing?" It's a huge compliment to Mr Woodford and the soundness of his long-term judgement.
Sadly, trying to get an interview with Mr Woodford is notoriously difficult. I have put in plenty of requests in recent years and been rebuffed each time. Presumably, he prefers to let the numbers do the talking and that's fair enough. But it hasn't always been the case.
Back at the tail of the dotcom boom in 1999, I took a private investor to meet Mr Woodford, to later write up for a magazine. Mr Woodford was engaging, interesting and passionate about his investment ethos. He was also, according to some prominent observers (many of whom now hold him up as a doyen), in real trouble.
His fund was languishing near the bottom of the performance tables because he didn't want to get involved in dotcom companies (remember this was 1999 when such companies with a turnover smaller than a public house would have mad market capitalisations in the hundreds of millions).
He was seemingly missing out on massive capital growth opportunities in favour of boring old-fashioned companies, such as pharmaceuticals and oil, which were real laggards in the index. The result of the meeting was that the worried investor, who had been considering selling his stake, put more into Mr Woodford's fund.
When the dotcom bubble burst a few months later that looked like a very wise investment, and that is still the case 13 years later. There is no such thing as a sure thing in investment or fund management but with growth of 292 per cent over the past 10 years, while the wider stockmarket is still lower than in 1999, Neil Woodford's record looks pretty damned close.
Fair deals on retirement
The news that the Financial Services Authority is to investigate the annuity market in the UK is welcome but long, long overdue.
When insurers were legally required to let their pension savers know of the open market option for 2002, barely half the job was done. Since then the FSA has largely sat on its hands over this crucial area of our personal finances.
Some insurers have tried every marketing trick in the book to encourage people to simply sign up to the annuity they are offering when it's time to cash in a pension pot.
One of the most common tactics has been to simply write to an individual and say that the pension pot is valued at x and if you'd like an income of y to start next month then sign on the dotted line. Faced with this type of letter the majority do sign and potentially lose thousands as a result.
There is, currently, no indication in those letters that if the pensioner has a chronic medical condition then it's very likely he or she can find a much better annuity elsewhere. Nor are there genuine health warnings on the dangers of signing up to an annuity that doesn't rise with inflation.
Now, from next month, a code of conduct is coming into force from the Association of British Insurers meant to make the process of buying an annuity a little fairer. However, I firmly believe that this will not be enough and that people will still be signing up to annuities which are unsuitable to them.
One way that the whole problem could be cut at the root and ensure fairness would be to simply ban insurance companies from selling annuities to their own pension savers. Enforced shopping around, if you like.
Now the Government is in favour of compulsion for our own good in the realm of workplace pensions, a little bit here would benefit the retirement wealth of the country hugely. In fact it has been estimated that retirement incomes could be boosted by £7bn if everyone shopped around.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
- 2 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 3 Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
- 4 John Travolta addresses former pilot's gay romance allegations publicly for the first time
- 5 Kanye West stops concert after two fans don't stand up - doesn't realise one is in wheelchair and the other disabled
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
Portuguese academic says British are 'filthy, violent and drunk'
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
iJobs Money & Business
£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...
£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony