Becket had long been an admirer of Woodford (pictured), holding his Invesco Perpetual High Income fund in his range of funds of funds portfolios for many years. However, he sold out after news of Woodford’s departure, and says he won’t be following him in his new venture, CF Woodford Equity Income, which is set to launch in early June.
“There were two factors for why we sold: firstly because we think his best days are behind him. We think that the areas he’s invested in are now unattractive,” he said. “We think that the pure defensive focus is unnecessary and that there are better options elsewhere.”
“Secondly, we were concerned that he or whoever was taking over the fund would find it difficult to manage the redemptions over such an uncertain period – especially as the fund was so big.”
“We will not be [investing in the new fund], no.”
Becket says he shares Woodford’s admiration for healthcare, pointing to the possible AstraZeneca-Pfizer merger as evidence of the opportunities in the sector.
However, overall he thinks that Woodford’s ultra-defensive stance is actually too conservative, and lists the Artemis Income and Schroder Income Maximiser funds as better, more balanced alternatives.
“I think there should be more of a balance. We’re looking for a barbell approach of cyclical opportunities and the high quality bias of someone like Woodford,” he said.
“There is a fine balance of both positive and negatives in the economy at the moment, and we think the degree of his defensiveness is irresponsible to a certain extent.”
“We think that [manager of the Artemis Income fund Adrian Frost] is more willing to change his mind than Woodford. The fund has more in the banks and mining sector, which shows that he is more willing to be flexible,” he added.
Becket’s views are in direct opposition to Whitechurch’s Gavin Haynes, who said earlier this week that he’s convinced Woodford can continue his success with his new venture, and will be buying his new fund next month as a result.
News of the CF Woodford UK Equity Income fund launch has caused quite a stir among investors, with many already setting money aside for the UK’s most highly respected investor.
Woodford confirms that he will adopt the same investment approach that he used whilst running the highly successful Invesco Perpetual Income and High Income portfolios – namely, finding undervalued companies that can deliver sustainable dividend growth in the long-term.
Performance of funds and index over 20yrs
Source: FE Analytics
Rob Gleeson, head of FE Research, continues to rate Woodford as one of the best equity income managers in the business, but says there is no point in risking an unproven fund at such an early stage when there is already an array of very strong alternatives.
“If it was in a less competitive area such as emerging markets or even Japan, I can understand why you’d be looking at this fund straight away, but there are so many proven managers in this area so I don’t think it’s worth the risk,” he said.
“The problem is, we don’t actually now how much of Woodford’s success was down to the manager, how much was down to Mark Barnett (pictured), and how much was down to the infrastructure at Invesco.”
“There’s no doubt Woodford played a huge part in the success of his funds, but it would be naive to think the UK equity team at Invesco had no impact.” “We’re watching from the sidelines, happy with the number of choices available in the UK Equity Income sector, but if it looks like he can repeat his success we’ll be taking a closer look.”
Among the funds Gleeson and his team currently rate highly, which could be seen as possible alternatives to Woodford’s new venture, include Invesco Perpetual UK Strategic Income, Artemis Income, Royal London UK Equity Income and Rathbone Income.
Source: FE Analytics
All but Artemis Income have a better record than the manager’s former Invesco Perpetual Income fund over one, three and five year periods, though the £8.3bn portfolio remains on top over 10 years.
Richard Scott, manager of the PFS Hawksmoor Distribution fund hasn’t ruled out buying CF Woodford Equity Income in the future, but says that he and co-manager Daniel Lockyer will be sitting on the sidelines for now.
“We have backed managers who have proven themselves at one company and then moved onto another, and it wouldn’t surprise me if Neil Woodford is able to be very successful again,” he said.
“There are some worries about whether he could be distracted by running a company with his name on the door. He will have to contend with a number of corporate issues, but I’d still back him to do a good job.”
“It’s a new fund but he will be running a vast amount of money due to his relationship with SJP, so this isn’t going to be able to run it in a more focused way than his previous funds.”
“If you held the manager at Invesco, I see no real reason why you wouldn’t hold him now, but I don’t see the move as a reason to buy him. As we weren’t a holder of his funds previously, we won’t be buying the new fund now.”
He explains that in general they prefer smaller, nimbler funds run by the “managers of the future”, but still thinks Woodford’s fund could have a place in their portfolio in certain circumstances.
“We have bought Woodford before at times when his funds have had a period of relative underperformance,” Scott explained.
“He has a very disciplined investment style and very seldom does he produce average performance – it’s either very good, or very dull. After a poor run we feel that the stocks he holds tend to be cheap, which was the case a couple of years ago.”
FE Trustnet will be meeting with Woodford early next week. If you have any questions for the FE Alpha Manager, leave a comment below or email us at editorial@financialexpress.net.
