Not every solo act who leaves a successful group makes it, but so far Neil Woodford, one of Britain’s best-known fund managers, is doing rather well from his decision to go it alone. Since leaving Invesco Perpetual last year to set up Woodford Equity Income Fund, he’s continued to outperform the market.
Since last June, the fund has delivered a 19.6% return. Over the same period the FTSE All Share returned just 7.8%, while the UK equity income sector returned 10.7%. In fact, says Richard Evans in The Sunday Telegraph, Woodford generated the best returns in his peer group of 85 funds.
Meanwhile, his old fund, the Invesco Perpetual High Income Fund, managed 12.9% – still creditable, but well behind Woodford.The fund’s remit is to deliver income and capital growth by investing in UK companies. The annual management fee is 1% for direct investors with minimum investment of £150,000, otherwise it is 0.75%. Investors have “flocked” to it, says Evans – it boasts £6.2bn of savers’ cash. Most holdings are blue chips, with a focus on tobacco (which might be a problem in the future), defence and pharmaceuticals.
The strong performance was down to a mix of exposure to healthcare and consumer goods, and avoidance of oil and gas, says Shane Hickey in The Guardian. Laith Khalaf of Hargreaves Lansdown adds that Woodford’s small caps selection generated 40% of the outperformance, despite accounting for only 15% of the fund.
Other picks include Royal Mail, Babcock and Drax, with 4%-5% of the fund invested in early-stage unquoted firms. Stock picking will continue to be key, as Woodford reckons UK growth will be “modest… at best” in the next five years.
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| Woodford Equity Income Fund top ten holdings | |
|---|---|
| Name of Holding | % of assets |
| AstraZeneca | 7.03% |
| Imperial Tobacco | 6.54% |
| GlaxoSmithKline | 6.23% |
| British American Tobacco | 5.78% |
| BT | 4.33% |
| Allied Minds | 3.60% |
| Capita | 3.57% |
| Reynolds American | 3.08% |
| BAE Systems | 3.07% |
| Rolls-Royce | 2.92% |