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Woodford protégé too much of a large-cap lookalike


If fund manager Neil Woodford — with his shaven head, round-necked tops and video messages from leather swivel chairs — sometimes resembled Austin Powers’ movie villain Dr Evil, then Mark Barnett was his Mini Me: not so much a protégé as a perfect tiny clone. Since they worked together at Invesco Perpetual, Mr Barnett has gone on to closely mimic Mr Woodford’s value investing style, his interest in unquoted stocks, even many of his holdings — if not his attire. And on Wednesday, two months after Mr Woodford’s own funds collapsed after investors took fright, Mr Barnett seemed to pay the price of being such a lookalike: he was ejected from one of the funds he managed, the £1.3bn Edinburgh Investment Trust.

However, according to the trust, this was not because of any similarity to Mr Woodford’s private-equity investing style. Chairman Glen Suarez said Mr Woodford’s problem had been too many unquoted securities and withdrawal requests; Edinburgh’s had been too few returns — the trust underperformed its benchmark for more than three years. Mr Barnett had not actually copied the illiquid investments of his mentor. He recently noted that his overlap with the failed Woodford Equity Income fund was less than 15 per cent. Indeed, by the time he was sacked, the only unquoted holdings still in the Edinburgh trust were Eddie Stobart and Eurovestec, representing less than 1 per cent of the portfolio.

His management style was different, too. Unlike Mr Woodford who was the boss of his own firm, Mr Barnett remained at Invesco Perpetual where he said he was “accountable to teams of highly experienced and qualified professionals as well as an experienced senior management team”.

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Instead, it was another uncanny resemblance to Mr Woodford that the Edinburgh trust could ignore no longer: he had been picking the wrong liquid, large-cap stocks. A shared belief that UK companies were undervalued due to Brexit currency effects had led Mr Barnett to mirror Mr Woodford’s holdings in outsourcer Capita, lender Provident Financial, and litigation funder Burford Capital, to name but three. All became more undervalued.

Now, in an irony that will not be lost on Messrs Barnett or Woodford, Edinburgh’s holdings in these larger stocks will be taken on by new manager Majedie. And, although Majedie takes a more flexible, total return approach seeking income and capital gains, it also sees value in UK large-caps. According to analysts at Investec: “[Majedie] believes that Brexit and broader economic weakness have created an exciting historical opportunity, with the scale of corporate activity evidence of compelling value. They favour domestic companies where a material valuation gap exists.”

So, in two days time, a general election result that gives clarity on Brexit could make Mr Barnett’s style look much less out of fashion. Unfortunately, as Mini Me found in his battles with Austin Powers, timing — and appearance — is everything.

Age old Saga

Euan Sutherland didn’t have much success selling stuff to dads. He became boss of clothes retailer Superdry just after The Sun newspaper called it a purveyor of “Dad-fashion”. He left after serial profit warnings and complaints about lack of design leadership. But Saga clearly thinks he can appeal more to grandads.

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On Wednesday, the over-50s travel and insurance group named him as its new chief executive, just five months after Lance Batchelor said he was stepping down. To some, this suggested Mr Sutherland had been quickly identified in an efficient recruitment process. To others, it perhaps indicated he had nothing much else on — apart from a cardigan and an episode of Countdown.

However, Mr Sutherland’s job before Superdry is arguably more of a pointer to his appointment at Saga. As chief executive of Co-op Group, he ran a consumer-facing retail business with great potential to cross-sell: mainly insurance and financial services products. He left only after discovering a greater potential for people to get cross: strong opposition to his reforms lead him to call parts of the business “ungovernable”.

Still, Saga has always sought to exploit cross-selling opportunities — even if booking a cruise does not typically trigger a need for motor insurance. Last month, the group appointed former Legal & General executive Cheryl Agius to run its insurance business and brought in Gilles Normand, of French insurance group Covéa, as chief operating officer.

Analysts reckon this may mean Mr Sutherland focuses more on leveraging the brand, to make group profit less skewed to the highly competitive insurance businesses. That would also indicate he has no immediate plan to break up Saga, as some had speculated after activist investor Elliott became a 5 per cent shareholder.

Activists tend to be young, though. Their patience with over-50s motor insurance customers may prove no greater than their patience with grandad motorists.

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matthew.vincent@ft.com



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