Will Woodford launch a private equity fund?

Nick Paler (Investment Week)
18 October 2013

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The UK's most famous fund manager could run a closed-ended private equity fund when he launches his own firm next year following his departure from Invesco Perpetual, allowing him to develop his passion for investing in start-up companies.

While Neil Woodford is likely to launch an equity income fund to cater for his army of loyal followers, expectation is also growing in the industry that he will opt to run a private equity-focused fund which would let him nurture start-up companies over the long term.

Woodford has run a reasonable weighting to private equity across both his income funds for many years, positions totalling as much as 5% of his funds' assets under management at various stages.

Mark Dampier, head of research at Hargreaves Lansdown, has met the manager on many occasions and said he would be surprised if Woodford did not consider launching an offering in the private equity space.

"He is very interested in nurturing these smaller, younger companies," Dampier says. "It might not be open-ended, because in that space you would not want money coming in and out all the time, but it is the area he is most interested in."

Woodford himself has always focused on holding companies for the long term, and has made no secret of his dislike of short-termism and its growing impact on the UK market.

Speaking to MPs earlier this year, Woodford said short-termism means investors are opting for "sale not voice" when it comes to struggling companies, preferring to sell a stock rather than open a dialogue with the management team and try to tackle problems together.

He added at the time: "As a fund manager, my average holding period has recently been above 16 years. At the moment it is a bit below that, but certainly over 12-13 years."

Earlier this week he further alluded to a desire to make some changes to the way he runs money when he exits Invesco Perpetual next April and starts his own firm.

He said: "My decision to leave is a personal one based on my views about where I see long-term opportunities in the fund management industry."

This article was originally published in unquote's sister title Investment Week.