View more on these topics

MM leader: Time to bet against Woodford?

Not for the first time concerns have been raised about the size of Neil Woodford’s income funds, which are now over £20bn. This week’s Sanlam Private Investment income study has recommended investors sell the funds in favour of a number of smaller income vehicles.

SPI says Woodford’s negative view of the economy has led to a focus on very large stocks, with concerns about his funds’ ability to react quickly to changing economic circumstances.

Some advisers have questioned the added active manager value achievable given the investment limitations caused by the size of the two funds.

Given Woodford’s bearish economic views, it is no surprise the funds have underperformed over the past year, especially with his reluctance to invest in financials. However, the two funds have beaten their sector average over three and five years.

Those investors seeking to benefit from any extended market rally will no doubt see more attractive equity income propositions. For investors where the level of income is of over-riding importance, such as many entering the at-retirement market, Money Marketing’s recent annual income study shows there is a range of propositions offering consistently higher income levels.

However, Woodford’s investment philosophy has never been about beating the crowd on income, nor worrying about being behind the performance curve at certain points in the economic cycle. His focus on big, dependable, large-cap stocks producing regular dividends will resonate with investors stung by past market crashes and who agree we are far from out of the economic woods.

Woodford’s refusal to become involved in the tech bubble is well remembered by those who gained, and those who suffered significant losses, when the bubble burst.

It is too simplistic to equate today’s markets with those of the late 1990s, but the instinct to steer clear of such trouble is a precious commodity.

Worries over fund size raise serious questions for advisers to debate and keep an eye on. There are other more bullish equity income vehicles firms may want to dovetail with, or investment philosophies advisers may believe are more suited to the economic climate. But it would be a brave person who bets against Woodford managing to keep investors happy with consistent growth and income levels long into the future.

Recommended

9

MPs attack ‘big four’ accountants over tax avoidance schemes

MPs have hit out at the “big four” accountancy firms over their use of tax avoidance schemes on behalf of large corporations. The head of tax from KPMG, Pricewaterhouse Coopers, Deloitte and Ernst & Young all faced questions this morning from the Public Accounts Committee over tax advice they have given. Labour MP and PAC […]

1

Bestinvest: Dog fund assets drop to £12.1bn but Jupiter goes in the dog house

There has been a ‘dramatic’ reduction in the number of funds on Bestinvest’s Spot the Dog list of worst performing retail funds – although Jupiter has been put in the dog house for the first time. Bestinvest has highlighted 64 unit trusts and Oeics with combined assets under management of £12.1bn in the latest edition […]

Ex-only platform Selftrade suspends new client business

Execution-only platform Selftrade has stopped taking on new customers and says it is voluntarily varying its permissions following discussions with the FSA. The firm, which has more than 200,000 accounts and more than £4bn of assets under administration, suspended the acquisition of new customers on 15 January and is now reviewing its processes. Selftrade says […]

Signia hires Schroders UK private bank chief exec to head wealth offering

Signia Wealth has hired Schroders UK private bank chief executive Rupert Robinson as head of wealth management. Robinson will work with founder and chief executive Nathalie Dauriac-Stoebe on key strategies for the firm and will focus on the firm’s day to day operations. He will also develop the group’s investment policy in tandem with chief […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Given that investing in equities is a medium to long term proposition, the 3, 5 and 10 year achievements of Neil Woodford’s funds are far more relevant and important than just one year’s performance.

  2. Oh come on, MM. It’s well proven that reinvested dividends contribute greatly to total return, and that dividend growth is a key inflation mitigator for investors taking income. Woodford also concerns himself with avoiding likely dividend-cutters, so it’s not as if he chases income at any price. His performance profile over 20-odd years suggests dips in relative performance are nothing new and his funds have been extremely large for donkey’s years, so unless you think he’s suddenly become a poor manager why sell? By all means ADD a smaller fund to the client’s portfolio if they have new money, but replacement is a huge call. Investment carries enough risk already, without needing to add unnecessary ones.

  3. Bet Against Woodford – Not me. I have been an ardent fan of his income funds and will continue to do so. The story in 5 years time will have its own headlines. “Woodford still on top” or Woodford Tops medium term income funds….yet again”. The man is a genius.

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com