CF Woodford Equity Income Fund C GBP Inc
It’s that time of year when teachers begin writing end-of-year report cards so here at TD we’re undertaking the same appraisal of Neil Woodford by assessing his first full year as fund manager of the CF Woodford Equity Income fund. Woodford has made a flying start at his new fund house both in terms of investor interest and performance. Fund flows and outperformance don’t always go hand in hand so it’s pleasing to see that the fanfare surrounding the fund’s launch in June last year has been followed through with strong returns for investors in the fund. Since 3rd June 2014 through 2nd June 2015 the fund’s total return has been 20%, an impressive achievement against the 6.5% figure for the FTSE All Share. Woodford’s record places him first out of ninety fund managers in the UK Equity Income Sector.
Performance tailwind
The absolute performance numbers have benefited from a fair wind, with Woodford’s style of investing being in favour during the fund’s first year. Income stocks have outperformed the broader market in addition to smaller-cap companies which have profited from the positive economic environment. Sector-wise Woodford has also been in the right place at the right time with significant exposure to biotech, the highest returning sector in the last 12 months. But the style and sector positioning is ultimately still an active fund management decision and there’s no questioning Woodford’s added value in the important realm of stock selection with well-known favourites such as Imperial Tobacco and BT churning out sturdy returns alongside smaller high-flying AIM-listed stocks such as 4d-Pharma.
Can the good times continue?
Woodford is likely to continue to perform very differently to the market due to his strong active management stance through positioning in the portfolio. This could lead to both above- and below-benchmark performance depending on market sentiment towards certain sectors prevalent in Woodford’s portfolio. Healthcare could be one sector which is likely to have a large bearing on the fund’s fortunes going forward. The manager’s near one-third allocation to the richly valued healthcare sector is a huge overweight relative to peers. If a secular headwind hits healthcare stocks then it’s likely to affect Woodford’s portfolio more than others, even with the manager’s stock-picking talent for pharma and biotech companies. On balance we think Woodford remains an appealing all-weather option for long term investors.
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