Having spent over 25 years at Invesco Perpetual looking after more than £30 billion of client assets, Neil Woodford is undoubtedly one of the UK’s best known fund managers. So when the announcement came around 2 years ago that he was intending to go it alone, it is perhaps understandable why this was one of the most eagerly awaited launches in UK fund management history. Now with more than 12 months trading history behind it, we take a look at how the fund has performed along with which shares have been the real star performers.
When Mr Woodford was talking about the impending fund launch he confirmed that the fund would have the same investment approach employed by him whilst in his former role at Invesco Perpetual, targeting capital growth and a level of income by focusing on valuations and seeking out companies that can return sustainable dividend growth, as well as those which will be the dividend payers of the future. His new fund would also include small-cap stocks and unquoted companies.
12 months on…
The CF Woodford Equity Income Fund launched on 2nd June 2014, and although his performance whilst at Invesco Perpetual had made him one of the most successful fund managers in recent times, as the investment maxim goes, past performance is not a guide to future performance. Whether he could mirror his previous achievements was of course at the forefront of every investor’s mind. So how has the fund performed?
Well, more than 12 months on, the widely followed fund manager has managed to accrue a portfolio worth close to £7 billion and with the performance to date that justifies investor’s confidence. In its first year, for the 12 months to the end of 30th June 2015, the fund returned 16.9%, compared with a 2.6% rise in the FTSE All Share Index, the fund’s investment benchmark. Not bad indeed.
As with all investment funds the full performance data is there for all to see and updated monthly, but what is extremely unusual for a fund manager is that not only has Mr Woodford made public all holdings in his fund (most funds groups only publish the largest 10) but he has also gone further and published details of the contribution of every single share held, thereby allowing investors to see how much each share has made, or lost, during the first full year of his new fund.
The star of the show in the year to 30th June 2015 was Allied Minds, a FTSE 250 company that provides finance and other services to early-stage technology companies originating from the United Sates. The company provided 3.2% of the fund’s 16.9% growth (equivalent to 19% of the total growth), driven by a 187% rise in its share price over the year.
The biggest growth of any of the companies invested in by Mr Woodford came from 4D Pharma, a pharmaceutical company focusing on the development and bringing to market of a number of projects targeting new therapeutic products and services. Woodford has long been a fan of the pharmaceutical sector and this is one that certainly paid off. Its shares rose by 515% in the year, contributing 1.58% of the fund’s overall performance.
Other top performers within the fund include Prothena, a biotechnology company based in the United States and Redde, a specialist insurance and support services group based in Bath, returning 154% and 144% respectively.
The biggest drag on performance came from Drax, the owner and operator of the large coal-fired power station in North Yorkshire. The holding accounted for 1.6% of the fund but reduced overall fund performance by 0.98% after its shares fell by 44% over the period.
The biggest share price fall came from Rightster, a company aiming to simplify the distribution of live and on-demand video by the use of a cloud-based software platform. Unfortunately shares in the business fell by 74% over the period, reducing the fund’s overall performance down by 0.45%.
New investments and exits
Further study of the Woodford Equity Income fund reveals that the portfolio has grown from 61 stocks at launch to 99 currently. There have been 52 additions to the fund in that time, whilst 14 companies have been given the axe including the only bank to feature at the launch of the fund, HSBC. Royal Mail was the biggest addition over the year and accounts for 2.3% of the fund while interestingly, twenty of the new additions are companies in the Health Care sector.
Fund size and allocation
Mr Woodford attracted £1.6bn of investors’ money when he launched the Woodford Equity Income fund, some of which came directly from funds he had previously managed at Invesco Perpetual. His now not-so-new fund has swollen to £6.94n as at the end of August 2015 with 86% allocated to businesses based in the UK and the three biggest sectors of Health Care, Financials and Consumer Goods contributing to 70% of the fund’s holdings.
The benchmark for the fund is the FTSE All Share Index and by comparison, the fund is significantly overweight in Health Care, 32.02% versus a sector benchmark of 8.57%, and Industrials, 15.23% versus 10.38%, the two combined totalling 47.25% compared to 18.95% for the benchmark. By contrast, the fund is significantly underweight in Financials, Consumer Services, Basic Materials and Oil & Gas, totalling 25.6% of the holdings versus a benchmark weighting of 55.4%.
The outperformance of the fund during its first year certainly suggests a proven and distinctive approach. The fund aims to only invest when there is a compelling long-term opportunity – and not to invest in shares just to make the fund look more like the index. As Mr Woodford’s style is often to go against consensus in order to deliver long-term returns, it will at times behave very differently to the overall market, a point which should ultimately be born in mind before investing.
The investment objective of the fund is to provide a reasonable level of income together with capital growth, which will be achieved by investing primarily in UK Listed companies. The fund is very much focused on delivering attractive long-term returns for investors through investment in quality companies that can deliver sustainable dividend growth. Income is paid quarterly.
Potential investors should therefore be looking to have their capital managed rather than simply having exposure to the market as a whole via an index fund or tracker. The team at Woodford Investment Management believes that “active fund management adds value for investors and that this is never more true than in challenging economic conditions”.
This fund is an actively managed fund which has outperformed its benchmark in its first year by some margin whilst Neil Woodford’s previous track record is testimony to his ability to make the right decisions when conditions are tricky – but ultimately past performance cannot be used as a guide to what will happen in the future and so you need to satisfy yourself first whether he can continue in the same vein over the longer term.
Invest via the Fair Investment Fund Supermarket
The CF Woodford Equity Income Fund is available for investment through the Fair Investment Fund Supermarket at 0% initial charge. The fund is available for this year’s ISA allowance (maximum of £15,240 for the 2015/16 tax year) and we also accept Cash ISA and Stocks & Shares ISA transfers. Investors who have already used their ISA allowance can invest via our investment account. If you’re ready to invest, then you apply online here.
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No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice. Tax treatment depends on your individual circumstances and may be subject to change in the future.
The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors. Past performance should not be taken as a guide to the future and there is no guarantee that these investments will make profits; losses may be made.
Regardless of what is happening to the UK economy and to the UK stock market, one of the most frequent demands put on our capital is the need to provide us with an income.
From capital protected bank deposits paying a fixed rate, capital at risk investments offering variable income, and everything in between, the options are vast. With this in mind, we bring you five bond funds paying over 5% income, all from our Select Range of investment funds and all available at 0% initial charge via the Fair Investment Fund Supermarket.
This month’s bond fund selections are based on the following criteria:
Paying at least 5% income
All of the funds have a distribution yield* of at least 5%. The lowest income is 5.30% whilst the top paying fund is currently yielding 6.64% (as at 31/03/2015).
0% initial charge
All of the funds have a 0% initial charge via the Fair Investment Fund Supermarket.
Payment frequency of at least quarterly
On the basis that receiving income at least quarterly continues to be an important consideration for investors seeking income, three of the funds pay income monthly whilst the other two pay quarterly.
Taken from our Select Range of funds
Our Select Range of funds is based on investment analysis carried out by leading independent research and ratings company Morningstar OBSR (click here to read more about how our Select Range of funds selected).
Minimum Bronze rating
The top three ratings given by Morningstar OBSR, Gold, Silver and Bronze, indicate that a fund is highly regarded by their team of analysts. The very highest ratings are given to funds which, in the analysts’ opinion, have the strongest ability to outperform their benchmark and peers over time, within the context of the risks taken – the stronger the conviction, the higher the rating. Three of the funds have a Bronze analyst rating and the other two are Silver rated.
The funds are ranked based on their Morningstar OBSR rating, starting with the highest:
The need for income remains firmly at the top of the investor’s New Year priority list and as the hunt for high yield opportunities continues, being able to understand and compare the numerous options available is becoming more important than ever. So what better place to start 2015 than with our first Investor’s Guide of the year where we give you an overview of range of income options on offer, as well as compare some of our most popular investment ideas from last year and their main differences.
Why is income a top priority?
There’s no denying that generating an income is one the most common demands placed on our capital, even more so as low interest rates appear to be with us for some time to come and there remains an inevitable uncertainty around what might happen to inflation in the coming years. Whilst annuity rates also remain low and many salaries and retirement incomes fail to keep up with the real cost of living, it is understandable why income remains a top priority, regardless of our stage in life.
It seems that regardless of the prevailing economic conditions, the kick out investment continues to be a popular choice with investors. Although not yet a mainstream investment when compared with investment funds, the defined return and defined risk on offer from this fixed term investment seems to make them particularly sought after when the market is at historically high levels and investors are finding it difficult to commit. We take a closer look at the kick out plan to try and understand why their popularity has continued to rise in recent years. We also consider how this might make for an attractive opportunity in the current investment climate as well as review some of the recent market trends.
Kick out investments hitting the mark
The defined return for a defined level of risk has made the structured investment an attractive addition to the range of investment options available, whilst in recent years the kick out plan has been the stand out of this type of investment in terms of popularity. Capable of adapting its structure in line with market conditions and investor demands, the inherent flexibility in how these plans can be put together is perhaps one of the main reasons for their continuing popularity, seemingly hitting the mark with a wide range of investors.
What is a kick out investment?
Kick out investments, or ‘autocalls’ to use the correct investment term, are fixed term investments that pay out a defined return providing a predefined event takes place. This predefined event is linked to the performance of an underlying investment, often a stock market index such as the FTSE 100 or sometimes a small number of FTSE 100 listed shares. If this ‘trigger’ event occurs, the plan automatically matures early or ‘kicks out’, returning your original capital along with the defined returns offered at the outset. Should this event fail to occur, the plan keeps going to subsequent trigger anniversaries or until the end of the fixed term.
Much has happened recently in the world of investment funds with some major changes taking effect from 6th April in terms of how investors access funds and how they are charged. With this in mind, we thought you might like a reminder of why many investors have already chosen the Fair Investment Fund Supermarket.
Here’s our Top 10 reasons why…
1. Extensive fund choice and our Select Range
Choose from over 2,100 investment funds from over 95 fund management groups including income funds, low cost trackers and managed funds.
2. Select Range of funds
Our Select Range has been created to help you choose by combining value for money with analysis carried out by leading independent research company Morningstar OBSR.
3. Huge savings on initial charges and free switching
Most of the funds available are offered at 0% initial charge saving you up to 5.5% when you invest, equivalent to £653 on a £11,880 ISA. We also offer low and transparent annual charging and no additional charges for switching.
With the fund management industry rocked by the recent news that star fund manager Neil Woodford will be leaving Invesco Perpetual, we take a look at five alternatives to consider for those investors who may be taking this news as a good time to review their options.
Decision to leave
Neil Woodford is undoubtedly one of the best known stars of the fund management industry and given the fact that across the giant Invesco Perpetual Income and High Income funds alone he runs close to £25 billion, it is indeed a news item worthy of further consideration. In total, he manages over £30 billion which is just under half of Invesco’s total assets.
Although the news will hopefully not bring about any significant changes in the very short term and investors should not be too hasty to make any sudden changes, his decision to leave will inevitably create difficulties and will no doubt give many income investors a cause for concern.
According to a number of market analysts, the index of UK’s leading blue chip companies could surge ahead in the short term. With the FTSE 100 Index opening this morning over the 6,700 point mark, what could this mean for our investment decisions? We take a look at what the experts are saying as well as consider some investment options to match your view of what the future could hold.
Citigroup tips FTSE to reach 8,000
The FTSE 100 could be on course to break its previous record high and hit 8,000 points by the end of 2014, according to a bold prediction from market strategists at Citigroup. A recent note by the bank’s analysts, reported in the Telegraph, argues that improving bank balance sheets and stronger corporate earnings, alongside easing fears of a eurozone breakup, will lift investor sentiment towards equities, helping to fuel a strong run in the FTSE 100.
Experts at the bank believe a revival of so-called ‘animal spirits’ within UK company boardrooms will spur a pick-up in merger and acquisition activity and act as further support for share prices helping to push them higher.
For investors seeking a diversified income stream and are attracted to the potential of dividend growth offered by companies in the Asian peninsular then the Newton Asian Income fund is worth a closer look. The current yield of the fund at the time of writing is an attractive 4.44%, with income paid quarterly.
Newton, who are based in London and have over 30 years’ experience, are well known for their distinctive approach to global thematic investing with a strong focus on extensive proprietary research. The Newton Asian Income Fund was launched in 2005 and seeks to generate income for investors together with long term capital growth through a concentrated portfolio of shares in companies based in Asia, excluding Japan, but including Australia and New Zealand. The fund has no sector or country constraints and invests in stocks in both developed and emerging Asian economies. The investment team at Newton led by Jason Pidcock who has 19 years investment management experience have a constantly evolving approach that anticipates change and identifies opportunities. The fund typically invests in companies that are cash generative with high dividend yields.