Star fund manager Neil Woodford has confirmed the details for his new CF Woodford Income Focus fund, which aims to deliver high income to investors.
The fund will launch on 20 March 2017, in time for investors to use it for their 2016/17 individual savings account (Isa) allowances.
It will aim to deliver an income of 5p per share, equivalent to an income yield of 5% a year on the initial launch price of £1, alongside capital growth.
Within the fund, Mr Woodford will invest in about 50 companies, making it more concentrated and therefore potentially more risky than other income funds which are diversified between more companies. The portfolio will include global companies alongside UK companies, but will be predominantly UK-focussed to start.
“I’m excited to deliver this level of yield against a difficult economic backdrop”
Neil Woodford, head of investment at Woodford Investment Management, says: “The level of income you can generate from an income-focused equity portfolio today is extremely attractive in the context of what is available from other asset classes.
“The fund will draw on my long-held investment philosophy and reflect my investment convictions. It will have a more concentrated portfolio, with a focus 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.
“This fund responds to investor demand for a Woodford fund which consistently generates a higher level of regular income, with no compromise on quality. I’m excited to lead a fund with a different focus, and deliver this level of equity yield against the current difficult economic backdrop.”
The new fund will have an ongoing charges figure of 0.65% on the cheapest ‘Z’ share class, which compares to 0.75% for the CF Woodford Equity Income fund.
Mr Woodford says he was disappointed by performance of the CF Woodford Equity Income Fund in 2016, which didn’t perform well because of its lack of exposure to oil, gas or mining companies.
But he points out that since launch almost three years ago CF Woodford Equity Income has returned 30%, placing the fund at the top of the Investment Association's UK equity income sector. This performance also compares well with the FTSE All Share Index, which returned 19.9% over the period since launch.
“From where I am sitting, having had a poor 2016, I am seeing more value in the stock market today than I have done in a long time,” says Mr Woodford. “The stocks I like were in a bear market last year, so I am more bullish now than I have been for a while.”
“New fund will appeal to investors prioritising income”
Laith Khalaf, senior analyst at Hargreaves Lansdown says: “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.
“Neil 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.
“The new fund will appeal to those investors prioritising income over growth, while the existing fund is more suited to those seeking long term total returns.”