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OPINION

Cult heroes

Cult heroes
September 5, 2014
Cult heroes

The other good reason for Woodford’s inclusion is that the man himself has proved a good manager to back throughout his career – his aggregate total returns over a near 30-year career run into thousands of per cent. It’s hardly a surprise that many billions of pounds followed him when he launched his new venture, and amply demonstrates the key man (or woman) risk that fund groups face when a star is running their clients’ money.

This phenomenon has been described as the cult of the fund manager – and the number of column inches devoted to news that he’s selling out of HSBC suggests that many are indeed in thrall to his every word (see page 52). But I would still suggest that this description is somewhat misplaced – if you’ve had good service over the years it’s only natural that you’d wish to keep on receiving it. It’s no more cultish than the reason I go back to the same hotels year after year, or prefer tried and tested tradesmen.

You do, of course, need to make sure that you are, in fact, getting the same good service – hotels can have a change of management and go downhill. Similarly, some star fund managers do not always keep their good performance going when given a blank canvas. Meanwhile there are many very good funds whose managers few beyond the IC funds team could name.

There will, of course, be people who simply buy the individual. But the main question to ask is whether an investment is suitable for your objectives. It’s why I’m somewhat worried about one side effect of Mr Woodford’s disclosure: that it can encourage investors of a more speculative mindset to slavishly buy the shares he owns without properly researching them. This happened when he first revealed his portfolio, leading to sharp price increases in some of the Aim shares he bought. These include several riskier biotech investments and, superb fund manager though Mr Woodford is, not all of these will come good. Without the backstop of diversification and time he enjoys, you may pick the dud.

This is where funds and trusts come into their own and why, despite the IC’s long-term commitment to stock-picking, we produce our Top 100 Funds to help you with those hard-to-replicate exposures.