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Woodford fund proposal receives mixed reviews

Woodford fund proposal receives mixed reviews

Investment advisers have mixed views about Neil Woodford launching a new fund, after news emerged that the star manager was considering bringing a higher-income offering to the market.

Last week, Woodford Investment Management revealed it was weighing up whether to launch an open-ended fund which would give him more flexibility to invest outside 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.

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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 1980s, and said people thought that was a “daft time” to launch.

He said: “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.

But he said he would not recommend the fund at this time.

Mr Bowden added: “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 Mr Woodford’s existing income fund to add value.

He added: “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.”

Ben Seager-Scott, director of investment strategy at Tilney Bestinvest, said he thought this was an “understandable move” for Mr Woodford, particularly with the search for income being a major theme in the era of ultra-low interest rates.

He said: “With no end in sight there’s every reason to think demand will remain strong for these kind of products,” he added, saying the income and high-income strategies proved successful at Mr Woodford’s “old shop”.

Darius McDermott, managing director of Chelsea Financial Services, said the fund would be a “natural extension” to Mr Woodford’s existing products.

“I think this is demand-driven,” he said.

katherine.denham@ft.com