What next for your Woodford-run funds?
It has also seen Invesco Perpetual rush to an equal degree to reassure existing investors there is no need to panic.
Neil Woodford managed approximately £30 billion, primarily in equity income funds, at Invesco Perpetual. Despite the fact he is not leaving until the spring, more than £1 billion has already been withdrawn from the underlying funds and plenty of investors are monitoring performance closely.
A survey conducted by our sister website Interactive Investor asked the question, will you sell your Woodford-run funds? More than 3,000 people expressed a view on their holdings and almost half (49.6%) confirmed they wouldn’t be selling, 12.6% said they will find an alternative fund and the rest (37.8%) said they would adopt a wait-and-see approach.
Interestingly, the 12.6% of those surveyed who immediately said they would find another fund is far less than the 4% of investors who have reportedly withdrawn from the fund already, so more money may be withdrawn over the coming weeks. In addition, there is a further potential £10 billion in investor money which may be moved if the performance deteriorates. No pressure then for the new lead manager, Mark Barnett.
However, it may be that the survey response was just a knee-jerk reaction to the news and may also have been in response to the removal of the fund from adviser ‘buy lists’.
Investors need to be aware that updating a buy list is not the same as a recommendation to sell. When a high-profile manager leaves, the fund gets put under review and this typically means it is not supported for new business and does not appear on any buy lists until that review has been completed. This is definitely not the same as suggesting that existing investors should sell.
But even if you won’t sell any existing holdings, you may be reluctant to invest more money in the funds for the moment so the big question for investors is what alternative options are there in the UK Equity Income sector?
The Unicorn UK Income fund tops the performance chart over three and five years and is in the top quartile over all time periods. It has benefited from exposure to the property and construction sectors and its manager has demonstrated excellent stockpicking skills. Its yield of 3% is lower than some funds in the sector, but overall this is a very consistent fund, which has provided both income and growth for its investors.
Always a consistent performer, the past 12 months have seen the PFS Chelverton Equity Income fund deliver some spectacular performance – which is part of the reason why it has won an award in our Fund Awards this year (LINK). Its wide remit, which allows the manager to invest across the range from small to large-cap stocks, has contributed to the fund’s performance, as has its fully invested position.
More volatile than many funds in the sector, the Standard Life Investments UK Equity Income Unconstrained fund has a very good track record and is another winner in this year’s Fund Awards (see page 60).The benefit of having an unrestricted benchmark allows the fund to invest across the UK equity spectrum, which has served it well.
A very high weighting in financial stocks has certainly helped performance and largely avoiding the recent underperformance of commodity stocks has also proved beneficial for the fund.
Whatever your view on the imminent departure of Neil Woodford, remember he was part of a team and Mark Barnett is a very good manager. However, relying solely on one fund and one fund manager is inherently risky and diversifying your holdings across different sectors, areas and fund managers is likely to result in better performance in the long run.
Rebecca O’Keeffe is the head of investment at Interactive Investor. Email her at email@example.com
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.
A standard by which something is measured, usually the performance of investment funds against a specified index, such as the FTSE All-Share. Active fund managers look to outperform their benchmark index. Cautious fund managers aim to hold roughly the same proportion of each constituent as the benchmark, while a manager who deviates away from investing in the benchmark index’s constituents has a better chance of outperforming (or underperforming) the index.