new section header here
welcome
to the
investor
centre
T
he signs of recovery in the
US and the UK continued
in the last quarter, with
growth in the latter proving
unexpectedly strong.That
prompted the suggestion from
Bank of England governor,
Mark Carney, that interest
rates could ‘rise sooner than
the market expected’. In the
US, however, new Federal
Reserve chair, JanetYellen, has
said that using interest rates
has ‘significant limitations’
that would increase the
volubility of inflation and
unemployment. Stock markets
generally reacted positively to
the improving economic news,
with some global indices
climbing to all-time highs.
Profit growth was subdued,
but profit margins are already
healthy, so some areas of the
market are now looking highly
valued. Political turmoil –
of varying degrees – remains
a factor in Ukraine, Iraq
and Syria.
in this section
22 Viewpoint
Neil Woodford, Woodford Investment Management
24 Unit Trust Portfolios
26 Fund manager commentaries
38 Final word
Ajay Krishnan and Roger Edgley from
Wasatch Advisors
22
|
THE INVESTOR
Youhave just established
your own fundmanagement
business, Woodford Investment
Management. Howwill that
operate?
We are already a team of about 25 and
we have the systems and infrastructure
needed to run a fund management
company.The investment support I get
will actually be greater than was available
at Invesco Perpetual as I will have more
dedicated resources.At Invesco, I had
people in the team I talked to and I did
discuss ideas with other fund managers,
but I could use only part of their time.
Now, the teamwill be dedicated
to my mandates and we will be working
together.And many of my opportunities
came from outside sources such as
analysts, economists, strategists and so on.
That will continue in the new company.
Will there be any change in
yourmanagement style?
Absolutely not. I will still be taking the
same approach, focusing on valuation,
fundamental analysis and taking a long-
term view of investments. I will obviously
be operating in a different environment,
but I think it is a very exciting and
liberating place to be.As part of an
early-stage business, I will be able to put
into practice all the things I have learned
from the ground up on how to run a fund
management business. For the funds,
and investors in them, however, it will be
business as usual.
What is your viewof the stock
market at themoment?
I think the markets are pregnant with
more risk than they have been for some
time.Markets globally have been good
to investors in the five years since the
financial crisis with shares, bonds and
property all moving forward aggressively
from their lows.
The action of central banks was
designed to increase asset prices and it has
been very successful in doing so.
Now,we are getting close to the end of
quantitative easing [QE].While Europe
may decide to start a programme of QE,
that will ultimately be a political decision.
In global terms, the biggest influence is the
Federal Reserve,which has already started
tapering.The US is halfway to the end of
QE with asset purchases reduced to
$35 billion a month – and by the end of the
year, I think it will have tapered to nothing.
The withdrawal of the universal panacea
of cheap money clearly exposes the patient
to the slings and arrows of the economic
fundamentals.There is, therefore, greater
risk in markets looking forward.
I am quite cautious about the future
path of share prices and think the next
five years are unlikely to be as good as the
past five.
There will still be undervalued
anomalies and, if you pick the right areas,
you will still be able to generate good risk-
adjusted returns. But the skills of the fund
manager will come to the fore in a way
they have not been in the past five.
Viewpoint
NeilWoodford,Woodford
InvestmentManagement
The UK Equity, Income Distribution and UK High
Income manager talks about his new business
fund manager viewpoint: neil woodford, woodford investment management
