A wave of bad news associated with some of his largest holdings and general below-par performance hasn’t put investors off investing their clients' capital into the giant funds run by Neil Woodford.
In the space of one week at the end of July, investors in Mr Woodford’s funds witnessed a trio of shocks.
The shares of AstraZeneca - the largest holding in the £10bn CF Woodford Equity Income fund, making up 8 per cent, or £800m of the total - fell 16 per cent in a single day, and have not recovered.
That shock was preceded by the shares of Provident Financial, a top ten holding in the £10bn Woodford Equity Income Fund, announcing a 45 per cent drop in profits. The company's shares have fallen from £32.45 three months ago to £20.80 on 8 August.
Mr. Woodford came out fighting about the investment case for those stocks.
But another holding took a hit.
The share price of AA - which is a 0.9 per cent holding in the Equity Income fund, and in which Woodford Investment Management is the largest institutional investor - has dropped to £2.07, having been as high as £3.09 during the past year, following news its chief executive has been sacked.
But even apart from those shocks, the performance of the CF Woodford Equity Income fund has been mediocre.
It ranked among the bottom 25 per cent of funds in the IA UK Equity Income sector over the past year, and in the 2017 calendar year.
The average fund in the sector returned 14.7 per cent in the twelve months to 4 August. In the same time period Mr. Woodford’s fund has returned 6.3 per cent.
Performance is better over three years - during that time the CF Woodford Equity Income fund has returned 37 per cent to 4 August, compared with 28 per cent for the sector average.
Mr Woodford has previously said in response to criticism of performance: “When we launched this fund, we said don’t judge us over six months or a year. We said look at our performance over three to five years, and if you are not happy at that time, then fire us.”
The esteem in which he continues to be held by the market can be seen by the growth of the CF Woodford Income Focus fund, which has swelled to over £700m since launch in March 2017.
Investment advisers told FTAdviser they will continue to back the manager, despite his recent bad run.
Adrian Lowcock, investment director at Architas, said every fund manager has a period of poor performance.
"I am not concerned that Woodfords performance over one year has been weak, it is his long term track record that should be the focus for investors.
"Stock pickers and in particular high conviction managers such as Mr. Woodford are always going to be subject to the volatility caused by events surrounding individual stocks.
"Unfortunately for Mr. Woodford the bad news came in a very short space of time.”
He added: “We should also remember that no managers are infallible and not every idea will be right, even exceptional managers get it wrong sometimes – it’s how they deal with the new information that matters.
"Mr. Woodford does not panic, he thoroughly researches his investments and knows the holdings extremely well which means when new information is received he can keep perspective and adjust his view accordingly.”
Darius McDermott, managing director at fund rating and investment firm Chelsea Financial Services, is another who remains keen to support Mr Woodford.
“Given the high profile nature of the Woodford funds they are always going to come under scrutiny when some of their stocks have a tough time. Neil has a fantastic long term track record and still very much has our continued support.”
However a dissenting voice came from Brian Dennehy, managing director at financial advice firm Dennehy Weller.
He said: “I’ve said a few times that Neil made the biggest and longest bet in fund management history and did so with extraordinary success”.
The “bet” to which Mr. Dennehy is referring is what he believes to be Woodford’s long-term investment strategy of buying stocks the market perceives to be defensive in nature, such as tobacco shares and big pharmaceutical companies.
Mr. Dennehy continued: “He appeared to wish to continue this with Woodford Equity Income, but nothing works forever, especially in fund management. It got off to a flying start.
"This often happens with new launches as the manager has the benefit of cash and a clean sheet of paper.
"But it began to go sour in 2016."
On the investment case for the CF Woodford Income Focus fund, which was launched in March 2017, Mr. Dennehy said what he found particularly interesting is that Mr Woodford sees opportunities he wants to exploit with this new fund, yet there is limited over-lap between this fund and his existing funds.
“If these opportunities are so obvious why won’t they also be reflected in the Equity Income fund? Is the current fund too big, either not agile enough or too big for any adjustments to make much difference to the performance?
"If I had to stay with Mr Woodford I would be inclined to switch into the new launch, Income Focus. Better still buy proven alternatives from other fund groups, your choice depending on whether you want income or total return.”
