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Woodford drops out of IA Equity Income sector

Neil Woodford’s signature equity income fund is being moved out of the Investment Association’s Equity Income sector after failing to beat the FTSE All Share index over the past three years.

Woodford Investment Management confirmed this morning that the Woodford Equity Income fund would be moving into the Investment Association All Companies sector.

A fund has to deliver a higher return then the FTSE All Share Index for inclusion in the equity income sector over a rolling period of three years, which the Woodford Equity Income fund has failed to do.

According to the Hargreaves Lansdown figures, the Woodford Equity Income Fund has delivered an average yield of 3.5 per cent in the three years to December 2017, compared to the 3.6 per cent for the FTSE All Share Index.

Woodford Investment Management said that during a recent consultation with the Investment Association it had recommended removing the headline yield target as it does not reflect the impact of dividend growth over the long term.

A spokesman for Woodford Investment Management said in a statement: “Throughout his 30-year investment career, Neil has focused on delivering positive long-term total returns through a combination of income and capital growth for his flagship equity income funds.

“He believes this strategy is in the best interests of his investors and he has never been willing to sacrifice capital to supplement income in the short-term and his portfolio construction isn’t dictated by yield considerations.

“Neil’s focus for the LF Woodford Equity Income Fund (and his previous equity income funds) has been, and always will be, on delivering a particular level of income per share, rather than a specific yield. From the outset, Neil said he would aim to deliver 4p based on the launch price of £1 and grow that income each year. That commitment remains.”

Senior analyst at Hargreaves Lansdown Laith Khalaf says: “This fund places an emphasis on long term total returns, and so Neil Woodford is willing to give up some income now in return for longer term growth prospects.

“Consequently, over the last few years the fund has yielded on average a little less than the UK stock market, which means it’s no longer eligible for inclusion in the UK Equity Income sector.”

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Comments

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

  1. Maybe he’s had his time?

  2. How long is long term?

  3. Andrew Macintyre 27th March 2018 at 2:47 pm

    IA Sectors are a mess anyway. Total return is what matters to most investors and not which sector a fund sits in.

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