Neil Woodford, the “star” fund manager who quit Invesco Perpetual six months ago to set up on his own – and attracted billions from small investors – has shot to the top of the performance tables, giving his early backers a gain of 7.4%.
Woodford’s decision to back AstraZeneca in its battle to fend off a bid from Pfizer paid off, with the shares in the pharmaceutical company performing strongly since the controversial bid collapsed. Shares in AstraZeneca are the biggest holding in the Woodford Equity Income, and have risen from £43.27 to £47.05 over the past six months.
The fund, which has garnered £8bn from small investors and big institutions in its short life, is also a major investor in tobacco stocks, such as British American Tobacco (up from £35 to £37) and Imperial Tobacco (up from £26 to £28.40).
Woodford’s fund has got off to a flying start since its launch on 2 June, making it the top performing UK Equity Income fund over this period. For comparison the FTSE All Share has returned -0.5% and the average UK equity income fund has returned 0.7%.
Laith Khalaf, senior analyst at brokers Hargreaves Lansdown, said: “Woodford Equity Income was one of the biggest fund launches in recent years, and while it is still early days, the fund is flying high in terms of performance. There were those who wrote Woodford off when he launched his new offering, on the basis the fund had no track record. This totally neglects the fact that in a fund like this, the manager’s skill is the most important consideration for investors.”
But the investors in Woodford’s former fund at Invesco Perpetual, who decided not to make the switch to the new fund, have done relatively well. Woodford was replaced by Mark Barnett, who is hot on his heels in third place, said Khalaf. The Invesco Perpetual fund is up 4.7% over the same period, while the second best placed fund is from Majedie, up 5.8%.
Woodford’s impressive early performance is testament to the manager’s approach to running money, in which he takes big stakes in certain sectors while ignoring others, such as the banks. Other funds tend to take smaller risks, managing investors’ money more in line with the stock make-up of the FTSE index.
“The performance of both managers is largely down to their sector calls, according to our analysis,” said Khalaf. “For instance Woodford shunned tech stocks and banks, shortly before the crisis . He has also been investing heavily in pharmaceuticals for a number of years, which has boosted returns.”
