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Looking for a successor to Woodford

Neil Woodford’s Invesco UK equity income funds accounted for almost one third of the equity income sector’s £71.3bn at the end of December.

But while the funds have been sector leader for total returns over the long term, they fall down the list when it comes to dividends paid investors, Lipper data shows.

When Woodford announced his resignation from Invesco last year many investors were prompted to review their decision to invest in his funds. For those who are investing for income, this raises questions about whether to remain in the funds.

The Money Marketing analysis of equity income funds by the level of income paid out shows the £8.42bn Invesco Perpetual Income and £13.1bn High Income funds have been consistently in the bottom two quartiles for cash paid to shareholders since 2009.

Both funds paid about £137 per £1,000 invested in the three years to 31 December 2013, while the capital grew to about £1,320. FE Analytics shows on a total return basis the Income fund was first quartile, while the High Income fund second quartile over that time.

Hargreaves Lansdown senior investment manager Adrian Lowcock says Woodford, who is set to move to a new equity income fund run by Oakley Capital in May, aimed for the best. “He does not buy necessarily high-yielding stocks, he is buying the growth story as well. He is not buying today’s yield, he is buying tomorrow’s yield.”

Woodford’s successor at Invesco is Mark Barnett, currently the manager of the Invesco Perpetual UK Strategic Income fund.

His investment style has been compared with Woodford’s approach to fund management and the dividend data shows his fund paid out £136.52 per £1,000 invested in the three years to 31 December 2013. The capital value of £1,000 was worth £1,416 after dividends paid over this period.

His fund is currently in the third quartile for income paid and this is the first time it has been out of the bottom quartile since 2007.


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