Should you invest with top fund manager Neil Woodford?

Neil Woodford has been one of Britain's top fund managers for a long time. Despite a lacklustre performance over the past three years, over the long run, he has trounced the FTSE All-Share index and made lots of money for his long-standing investors.

Now, after 26 years managing money for Invesco Perpetual, he has set up his own fund management firm, Woodford Investment Management. His new equity income fund is set to launch next month. So should you give him your money, or is there a better option?

The experience of Fidelity's Anthony Bolton who came a cropper after relaunching his career in China shows that it's not always easy to rekindle past successes. But Woodford, unlike Bolton, is sticking with what he knows best equity income investing. So expect a similar approach.

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Woodford tends to take big positions in unfashionable companies and sectors, and hold them for a long time. But he also often makes sizeable investments in smaller, more exciting firms in a bid to deliver better returns.

The fact that he is starting off with a lot less money than he was managing at Invesco will help him to do this (it's tricky for multi-billion-pound managers to make a difference to their overall portfolios by buying tiny stocks).

There's no doubt Woodford is a proper active fund manager there's no closet indexing with him. Focusing on dividends and income growth is also a strategy we have a lot of time for. However, it doesn't always work it can underperform the market for long periods of time.

And the bad news on that front is that quality income' stocks the stocks Woodford is targeting have enjoyed a bull market over the last three to five years, which will make it harder to find winners.

There's also the question of costs. No details have been released on the annual cost of investing yet. The fund will probably charge similar rates to its peers, with an annual management charge of around 0.75%, but it's something to check before you take the plunge.

If you don't want to take the risk of following Woodford to his new venture at a time when his chosen investment style is arguably overvalued, you could look at a cheaper, similar alternative tracker fund the Vanguard FTSE UK Equity Income Index fund.

It has a total expense ratio of 0.25%, and is likely do a similar job to Woodford's and other equity income funds, but at a lower cost.

Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.