Woodford unveils detail of new fund
Launching on March 20 the Woodford Income Focus fund will be the second open-ended fund in the group’s stable, following the launch of the now £9.6bn Woodford Equity Income fund in June 2016. Woodford (pictured) also manages the Woodford Patient Capital Trust, a closed-ended fund which raised £800m during its initial public offering (IPO) in April 2015 making it the biggest launch in investment trust history.
So how will the new fund differ from his first two offerings?
Investing in about 50 stocks, the new Woodford Income Focus fund will be more concentrated than the Equity Income fund’s portfolio of about 120 stocks around 70 in Patient Capital Trust. This is because as opposed to the existing fund, which is managed with total return mindset, the focus this time around is purely on delivering income.
“This fund responds to investor demand for a Woodford fund which consistently generates a higher level of regular income, with no compromise on quality,” says Woodford. “The focus is on dividend-paying stock market-listed securities and no geographic constraints – allowing me the flexibility to capture income from international equities when, and if, appropriate.”
Under Investment Association (IA) regulations funds in the UK Equity Income sector are only able to invest up to 20% of its portfolio in overseas companies. As a result the group have decided to place the new fund in the IA Specialist sector, meaning the manager can go over this limit if he feels necessary. However at launch he said it will be predominantly focused in the UK.
While there is little overlap in holdings between the new fund and the investment trust, Woodford said is a degree of commonality between the open-ended funds, with 15 companies appearing in each portfolio.
The overall stated aim of the new Woodford Income Focus fund is to deliver an income of 5p per share per year, which is equivalent to a yield of 5%.
Commenting on the launch of the new fund Hargreaves Lansdown senior analyst Laith Khalaf said it will appeal to those investors prioritising income over growth, while the existing fund is more suited to those seeking long term total returns.
“Woodford Income Focus will tick a lot of boxes for investors seeking an income from their savings in a world where cash and bonds just don’t cut the mustard any more,” said Khalaf.
“Woodford’s performance has been relatively weak in the last year or so, but investors shouldn’t let that deter them; his long term record is peppered with periods of underperformance, yet he has delivered exceptional value for those who are willing to stick with him.
“If a manager takes a truly active approach to their portfolio, particularly in a contrarian fashion, there are inevitably times when the market takes off in a different direction. However, history tells us that in the end the market tends to come around to Neil Woodford’s way of thinking.”