Following Neil Woodford’s resignation last week, experts are predicting substantial outflows from his Invesco Perpetual equity income funds.
Rival fund groups wasted little time in promoting their equity income funds as alternatives last week, some of them subtly and some less so.
There will undoubtedly be a mad scramble to sweep up the manager’s assets in what is likely to be the biggest ever shake-up of the IMA UK Equity Income sector.
Most of the money that leaves the Invesco funds is likely to flow into large, conservative equity income funds, although in recent years there has been a growth in multi-cap and unconstrained equity income funds that could also benefit from Mr Woodford’s departure.
Selling out of Mr Woodford’s funds may prompt investors to rethink their equity exposure and there could be more interest in global equity income products or even regionally focused funds such as Asian or European equity income funds.
We asked a range of fund buyers, such as multi-managers and discretionary managers, to list their top alternatives.
While many expressed support for Mr Woodford’s successor Mark Barnett, the best alternatives for those looking to relocate are listed here.
Managers - Adrian Frost and Adrian Gosden
The £6bn Artemis Income fund was practically a consensus choice among industry experts. The fund is co-managed by Adrian Frost and Adrian Gosden and invests predominantly in UK equities and, like Mr Woodford’s fund, has a bias towards large-caps.
“The fund manager has freedom from formal benchmarks, but the managers pay close attention to risk. This fund has an excellent track record versus the peer group over the short and long term,” said Gavin Haynes, managing director of Whitechurch Securities.
Rob Burdett, co-head of multi-manager at F&C Investments, said the Artemis managers are “very sensible, solid investors,” adding that he had invested with Mr Frost for more than 10 years. He said the two managers were “very much a team”, which had already proven it could cope with a large pool of assets given the size of the fund.
Fidelity MoneyBuilder Dividend
Manager – Michael Clark
Michael Clark may only have taken over this fund little more than five years ago but its risk and return profile has been compared with Neil Woodford’s. Paul Surguy, head of managed funds at Sanlam Private Investments, said the fund was the closest alternative.
He said: “The long-term profile of the fund is similar to Mr Woodford’s funds and it holds similar stocks as well, so it is a decent one if you’re looking for a direct alternative with a sensible, long-term approach and a reasonable income.
“They are both lower risk than the sector with higher returns. If you look at the sector breakdowns they are similar, although Mr Clark does not take the very big positions that Neil Woodford does.”