Architas has fully disinvested from the Woodford Equity Income fund within its six-strong £920m multi-asset fund range as it raises concerns over the manager’s current style, Money Marketing has learned.
The firm has reduced the overall asset allocation to UK equities in the range as it decides to focus on fewer more “flexible” fund managers in the sector.
The company has previously warned Neil Woodford is too concentrated in sectors such as financials and healthcare which could bear more risk of losses in volatile markets.
The multi-manager house had already cut its holding in the Woodford fund in August 2016. In the £330m Architas Multi Asset Active Intermediate Income fund the holding went down to 6 per cent from 10 per cent at the start of 2016.
On that occasion, senior fund manager Nathan Sweeney increased his position in Michael Clark’s Fidelity MoneyBuilder Dividend fund to 6 per cent.
An Architas spokesman says: “We have taken the decision to remove the CF Woodford UK Equity Income fund from the Architas MA Active fund range. Woodford has clearly had a tough period and faced some stock specific headwinds. But short term performance issues are not a reason on its own for us to remove a fund from portfolios and overall we still like and rate both the manager and the fund.”
In its tactical reduction of UK equities, Architas says it has chosen managers that could better navigate “a choppy” market environment. It says it is looking for active managers “that have more flexibility to both take advantage of opportunities and also limit their losses.”
Morningstar data shows the Architas Multi Asset Active Intermediate Income fund currently holds 5 per cent into the J O Hambro Capital Management UK Income fund and still holds the Fidelity MoneyBuilder Dividend fund, which makes up 5.6 per cent of the portfolio.
Architas is the third firm to ditch Woodford’s fund for following recent disappointing performance from the star fund manager.
Earlier in November, Aviva Investors used Richard Colwell’s £4.1bn Threadneedle UK Equity Income fund as an alternative to Woodford’s fund, after long-term Woodford investor Jupiter pulled approximately £300m from the fund in October.
Money Marketing understands Woodford Investment Management is aware some of its biggest clients are reviewing its flagship fund.
However, Hargreaves Lansdown, which together with St. James’ Place is one of Woodford’s biggest clients continues to hold the fund in its best buy list.
Hargreaves Lansdown senior analyst Laith Khalaf says the firm continually reviews funds and Woodford’s funds “are no exception”.
He says: “While we note the recent period of disappointing performance, we believe Neil Woodford is still one of the most talented managers in the business, who is just going through a tough time, as all active managers occasionally do.”
Woodford apologised to investors in September for recent disappointing performance. Payday lender Provident Financial, pharmaceutical company Vernalis, AstraZeneca and auto company AA all suffered double digit losses over the summer.
Khalaf says: “Despite the very recent poor performance, the Woodford Equity Income fund is still ahead of the UK stock market since launch just over 3 years ago, and is sitting towards the top of the second quartile in terms of the Equity Income sector.”
On a longer term horizon, Khalaf notes Woodford has outperformed the FTSE All Share by over 20 per cent in the last ten years, and by 360 per cent over the last 20 years.
Khalaf says: “Reviewing investments is simply part of the routine and regular functioning of the fund selection process, so we shouldn’t read too much into the fact that some in the industry are reviewing Woodford’s funds, it’s just part and parcel of performing due diligence.”
Woodford IM declined to comment.