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Woodford New Fund Launch Fails to Match Past Flows

NEWS YOU CAN USE: April saw fund launches from Woodford, Fidelity and Jupiter – and mixed fortunes reported for some of the UK’s biggest asset management houses

Emma Simon 27 April, 2017 | 3:08PM

April has been a busy month for investors: the unexpected news that there will be a General Election in June has caused markets to wobble, as has the first round of the French Presidential elections.

There was a handful of new funds launched too – and mixed fortunes reported for some of the UK’s biggest fund management houses.

New Woodford Fund Raises £533m

The Woodford Income Focus fund raised £553 million during its initial offer period this month. Although this is significantly less than other funds launched by Woodford Investment Management, it still compares well to most fund launches.

Woodford Equity Income, the first fund launched by the group, raised £1.6 billion at launch, while its Patient Capital investment trust (WPCT) raised £800 million.

Laith Khalaf of Hargreaves Lansdown said: “Neil Woodford’s new offering has proved a hit with investors, which is not too surprising given his pedigree, low management charges and the fund’s focus on a higher income.”

The new fund differs from the existing Equity Income fund by investing outside of the UK. The fund has an aim to yield at 20% more than the income delivered by the FTSE All Share over a rolling five-year period.

Bumper Year for Venture Capital Trusts

It has proved to be a bumper year for Venture Capital Trusts, with the sector raising £542 million during the 2016/17 tax year – the second highest figure on record. The Association of Investment Companies (AIC) said that this was an 18% increase on the amount raised by VCTs the year before.

The only time that this sector has seen bigger inflows was in 2005/07, when it raised £779 million, but that was after the income tax relief on VCTs was increased from 20% to 40% the year before.

The AIC said that these figures showed the “ongoing demand” for VCTs from investors, and reflected the tighter restrictions on pension saving in recent years.

Ian Sayers, chief executive of the AIC said: “More importantly this is great news for UK smaller companies which are accessing the finance and expertise they need to grow. VCTs have an excellent track record of providing scale-up capital to smaller companies, creating growth, jobs and innovation.”

A number of VCTs became fully subscribed before the end of the tax year: this included Unicorn’s AIM VCT (UAV), Maven Income & Growth (MIG6) and Albion (AAVC).

Fidelity Dips Toe in ETF Market

Fidelity International is making its first move into the exchange traded funds market, with the launch of two smart-beta ETFs, targeting income investors.

The two funds are the Fidelity US Quality Income ETF and Fidelity Global Quality ETF. Both will track indices devised by Fidelity which will follow companies that pay attractive dividends.

Fidelity said it hoped to build on this initial offering over the next year. The company said: “This is an area we believe our proven research capabilities and expertise can add value and increased choice for our clients.”

New Jupiter Frontier Trust

Jupiter Asset Management hopes to raise £200 million through an IPO for its new Emerging & Frontier Income trust.

The trust will be run by Ross Teverson, head of strategy, global emerging markets, at Jupiter. It will aim for a minimum yield of 4% in the first year, and will have a concentrated portfolio of between 40 and 45 holdings.

The trust will invest in both emerging and frontier markets, but with a maximum of 25% of assets in the higher risk frontier regions. Although the trust will run a multi-cap strategy, Jupiter confirmed that a higher proportion of assets will be in mid- and small-cap holdings. There will be a focus on income, with managers taking advantage of the growing willingness for emerging market companies to pay dividends.

Annual investment management fees on the trust will be 0.75%, based on net asset value. There will be no performance fee.

John Scott, chairman of the Jupiter Emerging & Frontier Income trust, said: "This is an exciting opportunity for investors to access some of the world's fastest growing investment markets and to do so under the auspices of an experienced investment management team.”

New US Infrastructure Fund

BNY Mellon Investment Management aims to capitalise on the growth in US infrastructure by launching a new fund, which will invest in US municipal bonds and other debt used to finance these projects.

The fund which will be domiciled in Ireland will be managed by Christine Todd, who works at the BNY subsidiary, Standish.

It is estimated that by 2025, public spending on US infrastructure projects will top $4.6 trillion, with municipal markets supplying 80% of the finance for this sector.

Matt Oomen, head of international distribution at BNY Mellon said: “Investors are increasingly recognising the attractiveness of US municipal infrastructure debt and we are excited to bring this strong proposition to them. US municipal infrastructure bonds have historically offered attractive yields, even at times of heightened volatility, while holding higher credit ratings and exhibiting lower default rates than the US investment grade corporate bonds. We believe this asset class represents an attractive risk-return profile for investors.”

Pension Withdrawals Top £10 billion

Figures released this month show that UK consumers have withdrawn £10.8 billion from their pension pots, in the two years since pension freedom rules were introduced.

This total was updated in April, following the release of information on withdrawals from the first quarter of 2017.

However, while the total continues to grow, the average amount withdrawn per person has fallen and now stands at £9,034. This is less than half the average amount taken in the three months following the introduction of these new rules.

These pension freedom rules, which came into effect in April 2015, allow all those aged 55 or over to withdraw cash from their pension. If they take more than a quarter of their plan this will trigger income tax charges.

Tom Selby, senior analyst at AJ Bell, a SIPP provider, said: “The pension freedoms have clearly been hugely popular. Hopefully this downward trend in withdrawals is indicative of savers managing their retirement incomes sensibly and making withdrawals at levels that will be sustainable over the long term.”

Lifetime ISA Launch Proves a Damp Squib

The start of the new tax year marked the launch of the Lifetime ISA, the Government’s new flagship savings product. However, at its launch date only three providers were offering these new savings plans to consumers, with just a handful of product providers saying they planned launches later this year.

The LISA was the brainchild of former Chancellor George Osborne, and were announced in his last Budget. The LISA offers a top-up on savings worth up to 25% a year, which can then be used to either purchase a first home, or save towards retirement. It is only available to those aged between 18 and 40 years old.

The three companies offering LISAs are Hargreaves Lansdown, The Share Centre and Nutmeg. Hargreaves Lansdown said it had opened more than 3,300 LISAs and added that only a small proportion where switches from other ISA products.

Investors Quit Henderson

Henderson Group saw large outflows in the first three months of this year, with investors withdrawing £1.4 billion from the fund management group.

However, the company, which is in the process of merging with US-based Janus Capital, said client sentiment had improved towards the end of the quarter.

In its results the fund management group revealed that the majority of these outflows came from Continental Europe and Latin American, but UK retail clients withdrew a total of £200 million over this period.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Albion VCT Ord69.00 GBX0.00-
CF Woodford Equity Income A Sterling Acc126.00 GBP0.18
CF Woodford Income Focus A GBP Acc101.71 GBP0.20-
Fidelity Global Quality Income ETF Inc5.68 USD1.11-
Fidelity US Quality Income ETF Acc5.77 USD0.92-
Maven Income and Growth VCT 6 Ord54.50 GBX0.00-
Unicorn AIM VCT Ord140.00 GBX0.00-
Woodford Patient Capital Trust82.00 GBX-2.90-
About Author Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk