Revealed: The Funds Hit by AstraZeneca Slump

Morningstar data reveals 17 equity income funds have overweight allocations to AstraZeneca in their portfolios, including star manager Neil Woodford

Karen Kwok 27 July, 2017 | 3:04PM
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This morning the pharmaceutical company AstraZeneca (AZN) saw its shares fall more than 16% after the firm unveiled a setback to its stage four lung cancer trial.

But it is not just direct shareholders who have felt the hit. Thanks to a 5% dividend yield AstraZeneca is popular with many equity income fund managers – and passive tracker funds too. According to Morningstar Direct data AstraZeneca make up 3.33% of the FTSE 100 index, meaning any ETF or tracker fund will have a similar weighting, while many equity income funds have an even larger allocation in their portfolios.

Arguably the most well-known one is the Silver Rated CF Woodford Equity Income fund, which has AstraZeneca as the top holding in its portfolio, making up 8.9% of the fund. The fund has 81 stock holdings in total, of which 30.3% of them are invested in the healthcare sector.

The fund is managed by Neil Woodford. Another fund under his management, St James’s Place UK High Income also has more than 7% invested in AstraZeneca.

Woodford, who is responsible for managing more than £16 billion assets across three retail mandates and separate segregated accounts, remains one of Morningstar analysts’ higher-conviction ideas in the UK equity income space, says Peter Brunt, senior fund analyst with Morningstar.

“The fund had a strong 2014 and 2015, with four tobacco companies and two mega-cap pharma stocks among the main contributors, helped by small-cap and unquoted names, in particular in 2015,” said Brunt.

AstraZeneca in Top 5 Holdings of 6 Top Rated Funds

There are four equity income funds and one investment trust rated by Morningstar analysts that have a large allocation to AstraZeneca in their portfolios.

The Bronze Rated Threadneedle UK Equity Alpha Income fund invests 7.2% of its portfolio in AstraZeneca, which is the second largest holding in the fund. The fund is up 4.8% year to date.

Threadneedle UK Equity Alpha Income represents a good choice for investors seeking a relatively concentrated UK equity fund that has a focus on both income and growth, said Simon Dorricott, fund analyst with Morningstar.

The fund is managed by Richard Colwell. Another fund that is also Colwell’s management, the Silver Rated Threadneedle UK Equity Income fund, also has 6.8% of its portfolio in AstraZeneca. The fund is down 2.3% over one month returns and it gains 7.7% year to date.

Bronze Rated Fidelity MoneyBuilder Dividend, Bronze Rated Rathbone Income, and Silver Rated JOHCM UK Growth fund both have more than 4% allocated to AstraZeneca in their portfolios.

The Bronze Rated Murray Income Trust (MUT) invests 4.3% of its portfolio in AstraZeneca, which is the fourth top holding in the fund. The fund is trading at a 8.5% discount and it has 11.8% returned year to date.

8 More Income Funds Invest 4% in AstraZeneca

Eight other funds which hold AstraZeneca in their portfolios have their weightings larger than the FTSE 100 index weighting. UK large-cap fund Omnis Income and Growth has AstraZeneca as the top holding in the portfolio with 8.7% weighting in the fund.

Threadneedle Monthly Extra Income, Threadneedle UK Growth & Income, Fidelity Enhanced Income have 5% of their portfolios in Astra. Threadneedle UK Overseas Earnings, Insight Equity Income, BlackRock Income and Growth Investment Trust (BRIG), Rathbone Blue Chip Income and Growth and Insight Equity Income Booster invest more than 4% of their portfolios in Astra. 

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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About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk