He presides over £30bn of funds, much of it from £50 a month savers which – multiplied many times – gives him huge influence
He’s the City’s kingmaker, who would have decided the future of BAE Systems – if the Germans hadn’t got there first – and who ejects FTSE 100 bosses from their jobs and virtually controls Britain’s tobacco companies through multibillion-pound stakes.
But unlike some of his peers, the man wielding such financial power is no Oxbridge educated City stereotype operating from the lavish interior of a tower in the Square Mile.
Based in an unassuming business park on a side street in Henley-on-Thames, Neil Woodford presides over the investments of small investors who have poured £30bn into his Invesco Perpetual funds.
For a decade, the 52-year-old’s funds have been the darling of financial advisers and private investors alike. Billions of pounds have gushed in, much of it from £50 a month savers and £5,000 Isa deposits that, multiplied many times over, give him immense influence.
His funds are the biggest shareholders in 30 of the companies in the FTSE 250. What he says matters. The City believes it was he who forced out Astra Zeneca’s chief executive, David Brennan, in April as the shareholder spring of investor revolts against executive pay got underway.
His style is usually to push for change from behind the scenes, but his frustration with BAE’s romance with Airbus owner Eads exploded into the open on Monday when he pressed the equivalent of a nuclear button by going public with his opposition to the tie-up. To prove he was serious, he hired bankers from Ondra Partners – whose sharp line-up of partners include the former Amersham boss Sir William Castell. By Wednesday the bid was over, killed by German government opposition. Had it limped on, however, the opposition of a man controlling more than 13% of the shares would have been hard to overcome.
It is evidence of how Woodford, who summons FTSE 100 bosses to his Henley headquarters rather than travelling to the City, uses his power. To many, he is an example of what John Kay, commissioned by the government to encourage long-term investment, should look for in a fund manager, holding shares for 15 years rather than switching in and out in search of a quick buck.
With a degree from Exeter in agricultural economics and a farmer in his spare time, Woodford’s breakthrough came during the technology bubble, which brought both the best and worst of times. During the 1990s he built up a solid reputation at Perpetual, a relatively small but fast-growing investment house he had joined in 1988. His funds out-performed but the headlines still belonged to others: Carol Galley at Mercury, Anthony Bolton at Fidelity and his own boss at Perpetual, Martyn Arbib.
As global stock markets were swept up in the technology, media and telecoms exuberance, Woodford stood back. He refused to buy “new economy” stocks and by early 2000 his one-year performance was the worst in the market. He fell off the major financial adviser buy lists, with one telling the Mail on Sunday that Woodford had “missed the investment boat … He is becoming more intransigent. Maybe his pride is getting in the way.”
Then, from 2000 to 2003, the FTSE collapsed. Woodford’s funds went up. His holdings in “old economy” businesses survived as internet stocks shrivelled. He invested into the least-loved sector of the stock exchange: tobacco. His holdings in British American Tobacco (Lucky Strike, Dunhill), Reynolds American (Camel, Winston) and Imperial Tobacco (Gauloise, Davidoff) turned into the star share price performers of the decade and remain at the core of his portfolio. No tobacco company deal in Britain can now be struck without Woodford’s approval.
When Perpetual was sold to Amvescap for £1.1bn in 2001 (a deal in which Arbib pocketed around £400m) it looked as if Woodford might walk. But the newly-named Invesco Perpetual persuaded him to sign up for a five-year contract. Now with a 24-year tenure, his longevity with one fund manager is rare. He has worked at only one other fund management group (Eagle Star), helped by a culture which supports his style of investing, which is individualistic and led by conviction.
Despite that, and despite having the look of a forthright panellist on a TV football programme, he is uncomfortable with punditry. Indeed, he told the Guardian that he did not regard himself as powerful. “I’m a very active, long-term investor. My average holding is around 15 years. What that means is exactly is what John Kay says, with ownership comes responsibility”. This explains his decision to speak out during the BAE row. With a 13% holding he knew his view would be crucial.
He sees his job as “value discovery”. His funds are not intended to track stockmarket indices and he regards his investment in unquoted companies – a cause of controversy as they can be riskier, and which he admits attracts regulatory scrunity – as being “socially useful”. Around 5% of his fund (out of a maximum of 10%) goes into companies spun out of places such as Oxford and Cambridge university.
In reality, he is happier down on his farm in Hambleden near Henley, although when he tried to redevelop it last year he came up against a tough opponent in Jeremy Paxman, the Newsnight presenter. Paxman was among protesters who turned out to block plans by Woodford and his fiance, Madeline White, with whom he has two children, to build an all-weather arena to train their horses. Paxman described it as “enormous, unsightly and environmentally unfriendly”. In a rare defeat, Woodford withdrew the application.
He also courted some controversy in 2008 by backing a series of flotations on the junior stockmarket, Aim, by City broker Cenkos and once again his performance is lagging. His £20bn Income funds are a long way down the one-year performance league, perilously close to bottom quartile in the tables. But this time, no one is talking about a fallen star. Woodford, who describes himself as patient investor, appears to have found patient followers too. “I’m very conscious of my responsibility,” he said. “I am just doing my job. My job is to represent the people who have trusted with me their money”.
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