Does Skandia’s Woodford switch set a precedent?

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Friday saw the latest in the big money moves to Neil Woodford as Skandia chose to close its versions of the Invesco Perpetual High Income and Income funds, transferring £640m assets to the former Invesco UK equity head.

The funds themselves are owned by Skandia Life, so the firm is free to choose where the money goes and who manages it, but the switch could set an intriguing precedent.

What happens when a lower profile manager with similar performance credentials moves on? What are the triggers for the change?

With such a high degree of movement in the fund management space it is hard to envisage a scenario where a mandate is switched every time a good manager moves on.

It is also interesting that Skandia chose to completely close the Invesco funds. The reasons for the transfer appear to make sense, as it obviously thinks the majority of investors want to move across to Woodford from Invesco. But was there an option to run both Invesco and Woodford mandates alongside each other and see what happens? Does there need to be a blanket switch?

If the Invesco funds remained open and a large majority of assets are switched to Woodford at advisers’ behest then the firm could close the funds at that point. At least there remains an element of choice in that instance.

Hargreaves Lansdown’s Laith Khalaf said about the move: “Life companies do close funds from time to time because of lack of investor interest.” But that is clearly not the case here.

It would be interesting to see if any money had recently come into the Skandia Invesco funds with the specific intention of accessing the management of Mark Barnett. These people will now be unable to access his High Income and Income mandates through Skandia.

Skandia also says the move will cost investors around 1 per cent due to transfer charges etc which has served to anger some advisers.

The question is not whether Skandia had the authority to make the changes it did, but to what extent advisers and clients invested in the Invesco funds were happy to make the move.

As was predicted when Woodford set up his new venture, assets have flowed out of the newly-managed Invesco funds and into Woodford’s new equity income offering.

Other providers could well follow suit and switch similarly large mandates en masse, changes which could upset advisers enough to make them transfer away from the provider altogether.

Sam Macdonald is deputy head of investment news at Fundweb and Money Marketing follow him on Twitter here