New Woodford Equity Income fund

Reaper

The respected manager Neil Woodford is setting up a new fund which launches mid-June. This is bound to be very popular, and there are few surprises.

The first is the low charges. No upfront charges and on most platforms the annual management charges will be a low 0.75%, with one or two major platforms (i.e. Hargreaves Landsdowne) a fraction less at [STRIKE]0.65%[/STRIKE] EDIT: Hargreaves Landsdowne now reduced to 0.6%. Don't go direct as it will cost you more.
Charge details: http://citywire.co.uk/money/woodford-equity-income-offers-0-65-share-class/a750150

Next is the fact he is supposedly not adding extra hidden charges on top. So the ongoing charge should be identical to the AMC, which is a bit of a revelation. The Sunday Times gives the example of Old Mutual UK Opportunities which has an AMC of 0.75% but the ongoing charge is really 1.19%. Of course there are other odds and ends that don't get included in the ongoing charge either but it's a step in the right direction.

However although people tend to be enthusiastic about his past record you might like to bear in mind Invesco Perpetual, where he used to work, has been fined £18.6m for its fund managers taking more risks with their investments than allowed under their fund objectives, and it sounds like Woodford was one of the guilty ones.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10809529/St-Jamess-Place-taken-to-task-for-hiring-Neil-Woodford.html

le_loup

I held inc units in his HI fund between 2002 and 2013 and it made me just over 10% PA ROI.
I'm tempted.

sorcerer

I watched the interview with him last week, and to be honest he didn't inspire me with confidence, mainly because he was trying to avoid any questions about Invesco Perpetual and what involvement he add with the it. So I am not sure if I am going to invest, I will wait for more details before making a decision.

vulcan59

I'm not sure why you are referring to this as the "High Income" fund. Everything I have read calls it the "Woodford Equity Income" fund.

Reaper

vulcan59 wrote: »

I'm not sure why you are referring to this as the "High Income" fund. Everything I have read calls it the "Woodford Equity Income" fund.

Yeah, sorry, force of habit from refering to his IP High Income fund in the past. I've changed the title.

The target yield is 4% in line with his aim to return 10% more than the FTSE All Share dividend yield. So a "Bit above average income fund"

vulcan59

Reaper wrote: »

So a "Bit above average income fund"

Yes indeed. I am certainly planning to invest.

Rollinghome

A fairly sceptical view from John Kenchington of FT Adviser http://www.ftadviser.com/2014/05/12/opinion/john-kenchington/the-woodford-bonanza-shows-need-for-advice-wefSQpUJ3AchvMkDfUqAzO/article.html

"But what worries me is that as this product marketing spectacular is unleashed investors could simply fall prey to unbridled salesmanship."

Some might find his conclusion a tad self-serving.

Reaper

Rollinghome wrote: »

A fairly sceptical view from John Kenchington of FT Adviser http://www.ftadviser.com/2014/05/12/opinion/john-kenchington/the-woodford-bonanza-shows-need-for-advice-wefSQpUJ3AchvMkDfUqAzO/article.html

Always good to hear both sides, but his arguments against sound weak.

I haven't seen the FT article he refers to but given he says the FTSE All Share is trading at 14.4 and the historic CAPE for the UK is 14.7 I fail to understand why he thinks the situation is "very bleak".

He sounds desperate to knock it, even complaining Woodford hasn't employed any women in his 9 man team. It's all very one sided.

mike88

I shall invest but will wait for the dust to settle before doing so and assuming the fund will be available on the funds network /cavendish platform.

Rollinghome

Reaper wrote: »

It's all very one sided.

It's hardly an in-depth article though it does have a couple of valid points.

People should first be deciding whether the UK equity income sector is where they should be investing and only then looking at which particular fund to use. Not the other way around as most "star manager" sales hype tends to encourage.

What the article is light on is where investors should be placing their money.

bowlhead99

Rollinghome wrote: »

Some might find his conclusion a tad self-serving.

I think it's fair to point out that when new products come into a market which are destined to be popular due to one figurehead, people could benefit by listening to the pitfalls and taking some advice, rather than blindly following the hype.

No doubt if HL are offering a discounted class they will be pumping it through their "wealth 150+". As it has no track record it is going to be raising money on reputation alone, no doubt helped by puff pieces in the press and "insights" published on the DIY platforms' sites. This is not necessarily unbiased information on which investment allocation decisions should be made. If they want a bit of this fund because they like the editorial and hype, will people sell another equity income fund or just add it and go overweight for the sector?

Woodford has made some good calls in the past, but equity income sector is certainly more expensive than at other times, as share prices have been pushed up by people chasing yield they no longer find in bonds etc. Whether the CAPE, to the extent you believe in it, shows a "bleak" future or merely one less rosy than the one Woodford has faced in recent years, I would suggest his target assets are unlikely to be very cheap if they are in the UK or US.

So, when all around are talking about Woodford being a God, an article that dares to suggest it will not be a walk in the park is bound to sound negative but should not necessarily be dismissed even if it is light on the detail.

Rollinghome wrote: »

It's hardly an in-depth article though it does have a couple of valid points.

People should first be deciding whether the UK equity income sector is where they should be investing and only then looking at which particular fund to use. Not the other way around as most "star manager" sales hype tends to encourage.

I agree with that, definitely.

They say they are building a new environment with cutting edge investment infrastructure and outsourcing model, new technologies etc. Even with this, there is a risk that the quality of research data and support staff on day one are not good as what was provided by the depth of established infrastructure at Inv Perp. The fees are not so high as some in the sector and the fund size will start smaller. So, while both those things are desirable for investors, it gives them fewer resources with which to make decisions.

I haven't read yet whether they have spent £5 or £5m or £50m establishing the firm. Hopefully the technology and outsourcing model ensures the admin is done properly and securely and Woodford does not want to be associated with a shoddy venture. But there are a whole load of things to consider when making a new investment, beyond what a flagship manager has achieved in the past with slightly different economic circumstances (of course I acknowledge he's been in the game a long time and done well)

What the article is light on is where investors should be placing their money.

True - he mentions Emerging Markets for example which I tend to agree should have better things ahead of them than the last couple of years might suggest.

However with China growth falling and UK now projected to do as much as 3% this year the West could continue do well with inherently higher quality and better "developed" businesses and markets.

The only thing you can really say is that if something was a real no brainer then the market would generally have bought into it, or at least its sector and geography, and it would not really be priced as a no brainer any more.