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Woodford defends strategy in investor grilling

Woodford defends strategy in investor grilling

Star fund manager Neil Woodford has refuted suggestions that the performance of his £10bn Woodford Equity Income fund is suffering due to him giving excessive focus to the early stage companies in his portfolio.

The Woodford Equity Income fund is the second worst performer of 84 funds in the IA UK Equity Income sector over the past year, returning just 0.2 per cent, compared with 11 per cent for the sector as a whole.

The hits to performance have largely been the consequence of severe and much publicised drops in the share prices of several of the FTSE 100 shares in the portfolios, including Provident Financial, which saw its share price fall 66 per cent in a single day after a profit warning.

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Further dents to performance came from share price declines at Astra Zeneca and the AA.

He said last week he won’t change his strategy of taking big stakes in companies, or focusing on the UK domestic economy, which he believes is performing much better than the market is currently pricing.

Woodford holds early stage investments in both the equity income fund, and the £925m Patient Capital Investment Trust, with the latter being dedicated to small caps.

The trust has dramatically outperformed the equity income fund over the past twelve months, returning 2.4 per cent.

To reassure investors, Mr Woodford held an online question and answer session in which he invited investors to ask him about his strategy. 

During the session, one investor accused him of spending too much time on early stage companies.

But Mr Woodford denied the early stage investments take up “too much” of his time.

He said five of the seven people who work with him as analysts and co-managers are dedicated to the early stage investments, so “a disproportionate amount of the resources of the team” are devoted to early stage investments.

The fund manager said: “I have been managing money for thirty years, and in that time I have learned not to get trapped into focusing too much on any one part of the investment portfolio. So while a disproportionate amount of the resources we have are focused on the early stage companies, I spend my time looking at all of the stocks in my investment universe, both the ones I own and those I don’t own.”

The run of bad news affecting Woodford’s portfolio has dimmed in recent weeks, and he received a boost with the news that Touchstone Innovations. This company is held in both the equity income fund (0.92 per cent) and the Patient Capital Investment Trust (1.54 per cent).

Touchstone Innovations commercialises early stage business ideas by taking stakes in early stage companies.

In a results statement this week Touchstone Innovations declared the net asset value of £461.1m, a 38 per cent increase on the previous year.

The company rejected a takeover offer made earlier this year.

David.Thorpe@ft.com