Woodford Equity Income Breaks £9bn Barrier Despite Outflows

Woodford Equity Income swells to £9.2 billion under management despite outflows, as IA reports industry assets at 12 month high despite Brexit sell-off

Karen Kwok 2 August, 2016 | 3:46PM
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The CF Woodford Equity Income fund has reached £9.2 billion under management – despite outflows of £157 million over the last two months.

Investors worried about the impact of Brexit on UK equities sold off the sector in June, marking the first outflows for Woodford Equity Income since launch in June 2014. According to from Morningstar Direct, June outflows totalled £143 million, with considerably more modest outflows last month of just £14 million.

Before June the fund had seen constant inflows ever since its launch. In 2015 the fund enjoyed £3.2 billion of inflows, making it the most popular fund of the UK equity income sector within the year. Even during the stock market selloff in August 2015 thanks to the China’s stock market crash, the fund still recorded inflows of £290 million.

The news comes as the Investment Association reveals that assets under management reached a 12-month high across all fund sectors in June, totalling £948 billion despite outflows of £3.5 billion.

CF Woodford Equity Income is a Bronze Rated fund managed by Neil Woodford, who has 34 years’ investment experience and he is “one of the UK’s most experienced equity income managers”, said a Morningstar senior fund analyst.

Analysts said that the long term track record of Woodford at his previous employer Invesco Perpetual proved his ability to stick to his strategy even during periods of poor performance.

“The strategy of this fund is clear, set with the objective of generating a positive capital return over the long term and growing the income whilst offering capital preservation.” They added.

The fund posted a positive return of 16.2% in 2015 and has gained 2.1% year to date. Despite the confidence shock of Brexit leading to fund withdrawals in June and July, the fund has taken £694 million inflows year to date.

The Morningstar Category UK Equity Income sector as a whole has recorded £1.4 billion outflows year to date amid growing market uncertainty. The UK flex-cap equity sector has also suffered from £1 billion withdrawals. However within the sector, the Gold Rated CF Lindsell Train UK Equity fund still enjoyed £450 million inflows year to date. This fund gained 10.5% year to date and it has 16% five years annualised return.

Investors Eye Gold and Biotech Funds

Gold often becomes the safe haven go-to among investors in times of severe economic uncertainty, and this has been reflected in the popularity of gold funds.

Chris Mellor, executive director of equities product management at Source, the ETF provider, said the recent amount of money flowing into gold products have been incredible.

“I guess it's a hedge against weaker growth, worse of economic outcome than people are expecting and the Brexit vote back at the end of June, the surprise there has induced to get more inflows into gold as people realized that this isn't a smooth process of economic recovery,” Mellow said.

The Gold Rated BlackRock Gold and General fund was on the top three most popular fund lists among Morningstar.co.uk readers in July, behind Woodford Equity Income and AXA Framlington Biotech. The fund saw £2 million inflows in June 2016 and has delivered a positive return of 129% year to date. Morningstar analyst Fatima Khizou believes this fund remains a strong offering for investors seeking mainstream gold and precious metals equity exposure in a risk-controlled manner.

AXA Framlington Biotech also caught Morningstar.co.uk readers’ attention in July, coming second on the most popular fund list. The fund is managed by Linden Thomson since 2012, and it has proved a strong track record since then. It has 27.6% five years annualised returns and 17.6% three years annualised return.

Investors Seek Global Equity Exposure

The Bronze Rated Fundsmith Equity fund continues to see record inflows in 2016 amid market uncertainty. It came forth on the most popular fund list in July among Morningstar.co.uk readers. In April 2016 the fund recorded £404 million inflows, the highest inflows of the fund in five years and in June 2016 the fund recorded £396 million inflows. Morningstar analyst Muna Abu-Habsa said from a performance perspective since launch the fund has been in a sweet spot.

“Since launch in Nov 2010 to the end of Nov 2015, it is up 16.7% on an annualised basis; by comparison, the MSCI World Index is up 10.3%. The fund is further ahead of its average global large-cap equity Morningstar Category peer, which has returned 6.7% annualised,” said Abu-Habsa,”We believe Smith’s long-term, distinctive approach and focus on delivering consistent, positive risk-adjusted returns make this a strong choice.”

Another global equity fund, the Lindsell Train Global Equity fund came after Fundsmith Equity on the most popular fund list in July. The fund gains 21.1% year to date and it has a 18.4% five years annualised return. Legg Mason IF Japan Equity fund was also on the most popular fund list in July.

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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
AXA Framlington Biotech GBP Z Acc427.03 GBP0.83Rating
BlackRock Gold and General A Acc1,233.21 GBP1.33Rating
Fundsmith Equity R Acc5.49 GBP-1.72Rating
LF Equity Income A Sterling Inc3.16 GBP0.00
LF Lindsell Train UK Equity Acc501.88 GBP-0.32Rating
Lindsell Train Global Equity A GBP Inc3.55 GBP-0.60Rating

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk