More investors sold out of Neil Woodford’s flagship fund than invested in it last month, signalling some could be dropping the old offering ahead of his new launch.
Last month the £9.8bn CF Woodford Equity Income fund was sold more times than it was bought, the first time this has happened in two years, according to data from The Share Centre.
Earlier this year FTAdviser’s sister publication Investment Adviser revealed Mr Woodford is planning to launch a higher yielding version of his current Income fund, dubbed the Woodford Income Focus fund.
It will look to generate 20 per cent more than the FTSE All Share over a rolling five-year period and aim to deliver income of 5p per share in its first full calendar year and sustainable growth thereafter.
The existing CF Woodford Equity Income fund launched in June 2014 after Mr Woodford left Invesco Perpetual to set up his own fund house, Woodford Investment Management.
It aims to provide a reasonable level of income along with capital growth by investing primarily in listed UK companies.
Andy Parsons, head of investments at The Share Centre, said activity around the Woodford fund made it the most traded fund of the month, but that this could signal that investors are selling his existing offering ahead of the new launch.
“With the launch of Neil’s new fund on the horizon, it’s quite possible that investors are selling out in preparation of the upcoming launch,” Mr Parsons said.
Adrian Lowcock, investment director at Architas, said investors should not necessarily switch from one fund to the other as both funds will have a significant overlap in underlying companies.
“There will of course be some selling to switch into Woodfords new fund, but this is not really necessary. There is absolutely no need to get into a fund before launch for retail investors and given there will be some 60 per cent overlap between the two funds even less of a need in this situation,” Mr Lowcock said.
The existing fund’s performance has begun to wane in recent months, as it returned 11.6 per cent over the past 12 months while the IA UK Equity Income sector returned 15.8 per cent, according to FE Analytics data.
The selling of Woodford’s Equity Income fund could be linked to the fact that it lagged both the FTSE 100 and All Share for much of last year, said Mr Lowcock, especially as oil and commodity stocks began to recover and investors rotated out of defensives and growth stocks into value.
“Investors had done well in Woodford and there was a lot of excitement surrounding the big rotation into value and Trump’s promises of reflating the US economy as well as more fiscal stimulus and less austerity in the UK,” Mr Lowcock said.
“After around seven years of austerity investors were pleased to hear a different story and switch into the value areas of the market.”
But Rory Maguire, chief executive of investment advising firm Fundhouse, said clients still have faith in Mr Woodford despite recent lacklustre performance.
Mr Maguire said that he questioned the approach of the new fund since it appears to restrict the approach of the well-known manager.
He said dropping the income requirement would “surely be easier than adding to it”, but added that Mr Woodford “wouldn’t do it if he didn’t think he could handle it”.
“Our view is rather than constrain a manager like that, drop the income rather than add to it,” Mr Maguire said.
The new launch will be Mr Woodford’s last fund to personally manage, as he said that future launches will be looked after by a different manager at Woodford Investment Management.
julia.faurschou@ft.com
