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Woodford: I am not defensive

Neil Woodford
Neil Woodford

Invesco Perpetual income guru Neil Woodford has said he is uncomfortable with being labelled “defensive”.

Speaking at the Fund Strategy Investment Summit in Kitzbuhel last week, Woodford, who manages about £29 billion in several funds and mandates, said the term can have a different meaning from that intended when applied to investment.

“I don’t really like the definition ’defensive’,” he said. “I think it conjures up an image of hiding, protection. Of course I’m protecting the interests of my unitholders, but I’m not hiding in anything.

“What I am doing is making investment decisions that have the potential to deliver great returns to investors.”

Woodford’s preference for more “defensive”-type stocks is fuelled by his outlook for the global economy, highlighted in his recent factsheet in which he said that the “developed world faces a prolonged period of low economic growth”.

His approach to investment remains unchanged, with the focus on companies delivering sustainable dividends and earnings growth despite the wider economic challenges.

Numerous blue-chip stocks from traditionally defensive sectors, such as pharmaceuticals and tele­communications, can be found in the Invesco Perpetual income and high income funds managed by Woodford and his team. AstraZeneca, GlaxoSmithKline, BT, Roche and Vodafone are top 10 constituents of the £8.8 billion Invesco Perpetual income fund.

However, one “defensive” sector the manager is less bullish about is utilities, where he has cut exposure. Woodford said: “In the utilities sector over the past 18 months we have reduced exposure by selling out of regulated utilities exposure.”

A “huge amount of investment” was required in electricity and gas, with returns on incremental investment “not attractive enough”.

“I’ve seen much better returns on other industries not supervised by regulators,” he added. However, he has retained positions in the Drax coal-fired power station and the energy company SSE.

Woodford said the telecommunications sector, although regulated, had provided good opportunities, with BT in particular having performed well recently.

“BT is a utility where the government and the regulator recognise that they have to incentivise a lot of the infrastructure investment in broadband,” he said.


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