Investment advisers have mixed views about Neil Woodford launching a new fund, after news emerged the star manager was considering bringing a Higher Income offering to the market.
Woodford Investment Management yesterday (8 June) revealed it was weighing up whether to launch an open-ended fund which invests in listed stocks not limited to the UK. Around 85 per cent of the holdings are expected to pay dividends.
The fund would be the third launch since Woodford branched away from asset manager Invesco to create his own investment management firm in March 2014.
However, investment advisers are split on whether they would invest in the proposed fund at this point in time.
Alan Steel, founder of Alan Steel Asset Management, questioned why Mr Woodford was planning to launch a High Income fund now, but pointed to the manager’s launch of the successful Invesco fund in the late 80s, and said people thought that was a “daft time” to launch .
“He obviously sees a gap in the market; it’s an area where he has expertise, and maybe he sees a demographic demand with Baby Boomers heading for long retirements.
“We’d support it once we confirmed what we suspect is his rationale.”
Gordon Bowden, director for Buckinghamshire-based Quainton Hills Financial Planning, said he suspected Mr Woodford was proposing a higher income fund because of the difficulties investors are having trying to obtain yield on their investments.
He said, however, he would not recommend the fund at this time.
The challenge will be whether the fund can find suitable companies that can pay that level of sustainable yield, without too much risk to capital values, adding: “At the moment the consistent dividend paying companies are at quite a premium because of the race for yield.
“I would want to see a reasonable level of track record and I am concerned that Neil might be spreading his expertise too thinly in his quest for funds under management.”
Adrian Lowcock, head of investing at Axa Wealth, said any new high income fund would need to be “significantly different” to Neil Woodford’s existing income fund to add value.
“Woodford is an excellent manager and has proven successful at delivering returns for investors, but he does so without the constraints of chasing yield for yield’s sake.
“A fund with a significantly higher yield will be more restricted and might not deliver the same long-term performance we have come to expect from Neil Woodford.
Mr Lowcock said the income yield on Invesco’s high income fund “struggled to live up to its name”, and argued on many occasions was actually lower than the income fund, adding the new fund would need to honour the high income name and the fund objectives.
Ben Seager-Scott, director of investment strategy at Tilney Bestinvest, said he thought this was an “understandable move” for Woodford, particularly with the search for income being a major theme in the era of ultra-low interest rates.