Neil Woodford: fund managers cost too much and deliver too little

26th September 2014

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Influential fund manager Neil Woodford has criticised the fund management industry for overcharging customers and paying managers too much.

Woodford (pictured), who left Invesco Perpetual last year after more than 25 years to set up Woodford Investment Management, manages £7 billion of assets.

In an interview with the BBC’s Today programme he criticised the fund management industry for charging too much often for delivering very little as they are normally following the herd rather than actively managing money.

‘The industry has overcharged in many aspects,’ he said. ‘It’s quite clear, in the banking industry and my own industry, that too often, the industry has been charging active fees for index performance or worse.’

However, he said the days of high charges could be coming to an end as customers become more attuned to costs and regulation steps in.

‘Retail clients in particular are waking up to the high charges that we’ve seen in the industry and I think, with some support from the regulator, we’re going to see those charges come down,’ said Woodford.

Woodford is one of the best performing managers in the country, which he puts down to taking a long-term view on investments which allows him to take more risk. He said most fund managers take too much of a short-term approach.

‘Fund managers are constrained by the fear that if they were to underperform the index for a three, six or 12 months period, their careers would be in jeopardy,’ said Woodford, adding that this makes them reluctant to invest in start-ups or buck the trends set by other managers.

Woodford is well known for bucking the dotcom trend in the late 1990s which then turned into a dotcom bust in early 2000s.

 

 

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