InvestmentsAug 24 2017

Woodford pins hopes on property shares

Search sponsored by
Woodford pins hopes on property shares
Aidan Crawley/Bloomberg
ByDavid Thorpe

Fund manager Neil Woodford said he remains as committed as ever to his investments in a raft of under-performing stocks, as he buys UK property shares to profit from the “robust” UK economy.

Mr Woodford has been in the wars of late as several shares in which he holds substantial positions in his £10bn Woodford Equity Income fund, and £720m Woodford Income Focus fund have dramatically underperformed.

The most egregious decline has come from his holding in Provident Financial, which lost around two thirds of its value on 21 August as it issued a profit warning.

Astra Zeneca and Rolls Royce shares are also held in his funds and have also performed badly.

It has been a tough year for investors in the Woodford Equity Income fund. It has lost 2.8 per cent over the past year, compared with a gain of 10 per cent for the average fund in the IA UK Equity Income sector as a whole.

Mr Woodford confirmed in his latest update to investors that he remains confident of the investment case for all of those shares.

He also reiterated his view that the outlook for the UK economy will be better than is currently expected by the market.

Mr Woodford’s view is that the UK banking system is now repaired and lending again.

He added that a country will always struggle for economic growth if its banks are not lending, as he feels the UK banks were not until recently.

Mr Woodford said the US was the first country to repair its banks and the first developed market economy to emerge from the financial crisis and deliver significant economic growth.

He said the UK banks are now repaired and so he expects a similar pick-up in growth in the UK.

Mr Woodford said European banks are “far from being repaired”, so he is negative on the prospects of the Eurozone markets in the short-term.

With regard to how he is investing to capitalise on the improved levels of economic growth, which he said he feels are just around the corner, Mr Woodford said he has bought more shares in Lloyds Banking Group, which is UK listed bank with the greatest focus on the UK domestic economy.

He has also bought more shares in property companies Regional REIT, which owns office blocks and industrial units outside of London, New River REIT, which owns UK retail units, the house builders Crest Nicholson and Redrow, and FTSE 100 property developer British Land.  

The fund manager said: “There will likely be challenges for investors ahead. We have been talking about economic and earnings risks for some time and as markets have risen these risks have increased.