Neil Woodford's firm set to launch new product.
Woodford Investment Management is to launch its third product – a higher income fund – in March. The Woodford Income Focus fund will not target a specific yield, but will aim to produce a greater level of income than that provided by Neil Woodford’s existing £9.6bn equity income offering.
It will aim to yield 5p per £1 share in its first full calendar year (2018), after which it will aim to deliver a sustainable growth in income over five-year rolling periods.
The fund is expected to yield 20 per cent more than the FTSE All-Share over this rolling five-year timeframe.
In contrast to Mr Woodford’s equity income fund, and his Patient Capital investment trust, Income Focus will not invest in unquoted companies. These stocks tend to be less mature companies, and hence less likely to pay a dividend to investors. Instead, it will have greater flexibility to purchase overseas shares, although it is expected to remain predominately focused on domestic companies. Up to 20 per cent of the fund’s portfolio can, in theory, be held overseas.
The company said in a statement: “Woodford Investment Management confirms that it intends to launch the CF Woodford Income Focus fund in March 2017 with a fixed-offer period. The dates will be confirmed in due course.”
A launch from Neil Woodford always tends to catch intermediaries’ eyes, but the manager’s recent performance struggles should ensure advisers don’t get carried away by the prospects for the new portfolio.
Mr Woodford’s existing Equity Income and Patient Capital trusts are fourth quartile in the performance tables over the past 12 months, although his long-term reputation remains intact. In truth, the existing Equity Income product is not a pure-play income vehicle. Its partial focus on unquoted companies reduces the yield on offer – to the extent that the fund could eventually fall foul of current Investment Association rules requiring UK equity income funds to yield 10 per cent more than the FTSE All-Share over rolling three-year periods.
The latest product focuses on what investors perceive to be the manager’s strength – the generation of income –although this is likely to come at the expense of some capital growth.
The Income and High Income funds that Mr Woodford previously ran at former employer Invesco ended up looking remarkably similar to one another and, while that is unlikely to be repeated given Income Focus’s lack of unquoted positions, advisers are unlikely to want to the concentration risk that would come from holding both funds in a single portfolio.