Woodford’s income funds rated as a sell

Neil Woodford’s income funds have been given a ‘sell’ rating by a wealth manager due to the size of the funds.

Sanlam Private Investments UK (SPI) have recommended the £9bn Invesco Perpetual Income and £12bn High Income funds as a sell and included them on its grey list of funds that are out of favour or in decline.

Mr Woodford’s funds have been struggling in the past year, with the High Income fund in the third quartile of the IMA Equity Income sector and the Income fund in the fourth quartile, according to data from FE Analytics.

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The report said SPI was downgrading the funds due to the £20bn of assets that Neil Woodford now manages in the income strategies and the focus on defensive stocks.

“This has led the portfolios to become very focused in many of the large stocks in the market,” the report said.

“We would prefer managers who are able to be more pragmatic in the face of swiftly changing circumstances and therefore place sell recommendations here.”

Other funds to drop to SPI’s grey list were the Newton Higher Income fund, which was recently taken over by Richard Wilmot after the previous manager Tineke Frikkee was removed from the mandate, and the Standard Life UK Equity Income Unconstrained fund.

Anthony Nutt’s £1.8bn Jupiter Income fund was placed on the black list of consistently underperforming funds and given a sell rating, in spite of Mr Nutt’s decision to hand over the reins to Ben Whitmore and Philip Matthews this month.

However, SPI has initiated a buy rating on John McClure’s Unicorn UK Income fund, which is the top performing fund in the Equity Income sector in both one and three years, and included it on its white list of favoured funds.

The wealth manager said the fund provides “something different from many other equity income funds with a larger proportion of smaller companies than most, yet still provide an attractive level of income”.