Woodford: The Sequel? Let's Hope Not

Editor's Views: After Morningstar's downgrade of two Mark Barnett funds, and obvious parallels with Woodford's woes, investors will be keeping a close eye on his portfolios

Holly Black 8 November, 2019 | 10:42AM
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In the reams that have been written on the Woodford saga, commentators are always keen to stress that the circumstances surrounding the demise of the manager’s funds were unique; singular; idiosyncratic.

Enter Mark Barnett.

A contrarian, large-cap investor moving into the high-octane world of start-up and biotech investments. Poor performance. Investor redemptions. A Morningstar downgrade. Does it feel as though we’ve been here before?

I sincerely hope that we are not about to see Woodford: The Sequel, but the parallels between the funds of the two managers are impossible to ignore.

With around £11 billion of assets between the Income and High Income funds, Barnett still has a lot of wiggle room at the moment. But investors may feel uneasy as they look through the manager’s portfolio and see a number of names that look familiar from another certain high-profile fund portfolio. Many of the stocks he shared with Woodford have been hit hard in the furore around that fund’s suspension and I worry that these small companies may now be more difficult to offload than ever before.

One thing Barnett does have on his side, however, is the might of Invesco and all that goes with working for a behemoth of a fund firm, including a big and powerful compliance, risk and oversight department.

Invesco was keen to point out that 80% of the assets in Barnett's portfolios are invested in companies worth at least £500 million - that is to say they are large, liquid stocks whose shares should be easy to offload if necessary. But I'm going to be watching with a keen interest over the coming months to see if the portfolios change shape.

This could be the time for big fund firms to prove their mettle over boutiques, and show why all those fund managers striking out on their own might be better off staying put and enjoying the wealth of resource available to them at bigger outfits.

On a side note, the downgrading of Barnett's funds by Morningstar analysts was an interesting first insight into how the enhanced ratings system will take shape as it's rolled out over the coming months.

Barnett's fund was downgraded from a Bronze to Neutral Morningstar Analyst Rating - but the more expensive share classes are now rated Negative.

Investors in the fund can decide for themselves whether to stay put and see if performance can pick up, but at the very least they should be making sure they're in the cheapest share class, so that fees aren't eating into the already meagre returns. 

Pale, Male Fail 

The lack of diversity in the investment industry is sometimes staggering. The City has a dreadful reputation as a pale, male and stale old boys' club and when we see research showing that 43 of 303 investment trust boards have no women of them, it is all too clear why that reputation persists.

Granted, progress has been made. As recently as 18 months ago, 60-odd trusts had all-male boards, so we’re moving in the right direction. But it’s not good enough.

This isn’t just a case of what’s fair and right, it’s about simple business sense. Diversity brings with it a range of skills and perspectives and has been proven time and again to translate to greater success and profitability. What’s not to like about that?

Stay Scam Safe 

It is so saddening to hear about anyone being defrauded out of their hard-earned savings, and now we hear from the FCA and The Pensions Regulator that the average victim of a pensions scam loses £82,000 – the equivalent of 22 years of saving wiped out, often with a single phone call.

The Pension Freedoms were undoubtedly a fantastic way of empowering people to take charge of their own future in retirement, but they have also opened up tens of thousands of people to the unscrupulous tactics of heartless fraudsters.

We need the regulator to catch up on fraud and quickly, because these scams are increasingly smart and difficult to spot. But, in the meantime, we have to try and protect ourselves. If you get a call out of the blue offering a free pensions review or insisting you transfer money to a safe account, hang up. You should never be pressurised into making any financial decisions and never share your private details with someone you don’t know.

This isn’t a time to worry about being rude to a cold caller, it’s the time to make sure the money you’ve saved stays in your own pocket.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Holly Black  is Senior Editor, Morningstar.co.uk