Did Woodford Collapse Curse Mark Barnett?

Editor's Views: The exit of Mark Barnett from Invesco has looked inevitable for a while, especially after Woodford's demise, but it's normal investors who have to pick up the pieces

Holly Black 15 May, 2020 | 11:59AM
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Few investors can be shocked at Mark Barnett’s departure from Invesco. It’s been a heinous time in his career and, frankly, it’s more surprising that he stuck it out at the funds as long as he did.

A long-term view is often need in investment, but how long can investors be reasonably asked to endure underperformance before real change is enacted?

The writing has pretty much been on the wall for Mr Barnett since the collapse of the Woodford Equity Income fund last year. Rightly or wrongly, Barnett’s career was just too intrinsically tied to Woodford’s to survive. That is a shame in some ways; we may never know how many of those overlapping unquoted holdings between the pair’s funds were there because Barnett believed in them or because he’d been left lumbered with them by his predecessor and unable to sell.

You could argue that Invesco as a firm acted too little and too late, leaving it until April this year to take any decisive action over its illiquid investments.

And, ultimately, as usual, it’s the end investor who pays the price. A fund manager can walk away relatively unscathed, but investors who have doggedly stuck with these funds are now left to work out what to do. Do you stick around in the hope the new managers can salvage the situation, or cut and run?

Selling at a low means admitting a loss, and is never an easy decision for an investor. But I can’t help remember this piece of investment wisdom: an investment which falls 90%, is actually one that fell by 80% and then halved.

Different Views, Different Trends

It’s fascinating to hear from fund managers at the best of times – even more so at the worst of times. It always amazes me how far the opinions of these investors can differ: one thinks the good times will roll, another is all doom and gloom; one piles millions of pounds into a stock than another is shorting.

This week we’ve heard Finsbury’s Growth & Income’s Nick Train say this has been the worst period of his 39-year career, Scottish Mortgage’s James Anderson gunning for more growth, and Argonaut Absolute Return’s Barry Norris explaining how his bets against stocks have delivered double-digit returns.

I’m not sure which of these views I most tend towards. While this has certainly been the worst period I’ve seen in the market, with many (too many) years left until I retire, I find it hard to be overly troubled about the effect on my own portfolio. That said, I’ve been feel like markets have been looking toppy for some time and been wondering how long growth stocks can really keep growing. Last year I took profits from a couple of growth-oriented funds and moved them into more balanced and value-focused strategies – please don’t tell James Anderson. As for shorting, as much as I’d love to have the skill to do it successfully, there’s something about betting against a business that always feels a little off to me.

The good news, as an investor, is that you don’t have to pick a favourite or agree with any of them. The beauty of a diversified portfolio is that you could feasibly invest in managers with entirely different outlooks in the knowledge that it’s unlikely they’ll all be wrong at the same time.

Seed Capital

Fifty-odd days into lockdown and my benchmark for what classes as exciting has definitely changed.

Meet-ups with friends, holidays to far and distant lands, a visit to the theatre or a concert used to be the exciting things to look forward to in my diary. This week I’m excited that a local coffee shop has opened for socially-distanced takeaway orders and that I was able to pick up some flower seeds to try my hand at gardening.

A short lockdown would, I think, have ended in a splurge of pent-up spending demand. Jubilant at their restored freedom, people would have booked those trips of a lifetime, organised big parties for friends and family, and filled every scrap of free time with fun-filled activities. But as lockdown has gone on, I think certain habits have likely changed forever.

I’ll be pondering the investment opportunities within that as I plant my sunflower seeds this weekend.

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