Those of a certain age, and some a little younger, will have fond memories of the UK’s original “pirate” radio station Radio Caroline. As a long time supporter of the station, Paul Hipkiss Independent Financial Advisers now regularly advertise on the station which continues to this day.

Radio Caroline can be heard on the internet at www.radiocaroline.co.uk on A.M. 648 in East Anglia and on DAB+ in many major cities.

We now deal with enquiries throughout the U.K.

Woodford Fund Management To Close

The management at Woodford have announced that they are to close the business with immediate effect. In consequence, management of the funds run by them is being taken over by new managers.

In consequence, it has been decided that the Woodford Equity Income Fund will liquidate the investments held, and the cash value returned to investors. Whilst this is being organised, the fund remains closed to withdrawals and additions.

It is anticipated that this process will start in mid-January 2020. Part of the portfolio is invested in liquid easily traded shares listed on recognised stock exchanges, and these investments can be sold quickly. However, in addition, a sizeable percentage of the investments are in private companies where shares will take longer to sell. In consequence, it may take months, or even years to fully liquidate the entire portfolio. Hopefully, more will be known early in 2020.

Clients with any concerns should make contact with us.

Fortunately, our clients have only minimal exposure to the fund as we have been actively reducing clients’ exposure to the fund, which now makes up less than 0.01% across client portfolios.

The Effect of Brexit

The question most asked by clients during annual reviews is “what effect will Brexit have on my investments?”

Stock market performance generally reflects the known knowns. In other words it knows the possible outcomes and has valued shares accordingly. It is the known unknowns that cause problems – hard, soft, delayed or no Brexit!

Once the known unknowns are resolved there is every reason to believe that shares will be valued more positively as companies will then know how to plan for the future.

The Problems At Woodford Fund Managers

Neil Woodford’s Equity Income Fund has suspended encashments and additional investments for an as yet unknown period. This follows a period of underperformance by the manager that led to many investors withdrawing their investments.

In order to allow for an orderly disposal of investments to meet redemptions, rather than being a distressed seller, the fund has been closed temporarily. This will allow assets to be sold to meet the possible “rush for the door” when the fund re-opens.

Neil Woodford was one of the most highly regarded fund managers. He established himself as a dependable manager who outperformed most others over a period of some three decades. It is difficult to believe that he has suddenly become a poor manager. Like every manager, he experiences periods of underperformance when his investment style differs from current market sentiment. Over longer periods, his investment style has outperformed many others, so it will be no surprise to see him do so in the future.

Once the fund is open for business again we will be reassessing the future of the fund to determine whether it is one to be recommended.

Pension Freedoms

The new pension freedoms that were introduced in April 2015 have transformed the attraction of saving through pension plans, and introduced significant benefits and flexibility for those approaching retirement.

In consequence, we have received a large number of enquiries for help and guidance.  In particular, we have arranged flexible draw down plans for a number of new clients who wish to flexibly withdraw an income from their pension savings. With annuity rates being at an all time low, for many people this will continue to be an ideal solution.

Also, we have had enquiries about taking all the pension fund out in one go, which is usually a total tax disaster, to invest in buy to let. In other words taking money from a tax free fund, paying tax on it, and then paying tax to buy an investment where the income will be taxed!!  It seems that financial planning by the man in the pub is alive and well and a disaster waiting to happen.

Invesco Perpetual Fund Manager Leaves

Neil Woodford has decided to leave the company in April next year. He manages the large and hugely successful Perpetual Income and High Income Funds.

Neil has been a highly successful fund manager, an industry legend, and has been at Invesco Perpetual for most of his working life.

His ability to earn his investors consistently better than average returns on their investments with him has meant that we have heartily recommended him over several decades. His funds appear in the majority of our clients’ portfolios.

Neil is head of UK Equities at the company and he works alongside other fund managers, sharing their ideas and giving them the benefit of his experience. Invesco Perpetual themselves are a well resourced organisation and provide their managers with all the resources and research need to manage their portfolios.

Our view is that whilst we would have preferred Neil to remain with the company, we are comfortable with the calibre of the manager replacing him.

The replacement manager is Mark Barnett. He has worked alongside Neil Woodford and has been with Invesco Perpetual since 1996. He runs a similar fund, the Strategic Income Fund, the performance of which has recently outpaced Neil’s fund. The difference between the funds is that Mark Barnett’s fund is much smaller and can invest in smaller companies.

Mark Barnett is a FE Trustnet FE Alpha Manager who has maintained a consistently high alpha score over a proven track record in rising and falling markets.

We have been using the Strategic Income fund for some time are comfortable with the change of manager.

Our recommendation to clients is that there is no need to change anything as a result of the management change.

I shall, of course, be providing monitoring of the situation and will update clients at the next regular portfolio review.