In a letter to Woodford investors, the fund’s authorised corporate director Link Fund Solutions wrote: “We anticipate that the suspension of dealing is likely to last until early December while we implement the strategy to reposition the portfolio in order for the fund to be reopened at that time, and which is conditional upon achieving the target fund profile.”

Woodford himself apologised and said: “I understand the frustration, inconvenience and anxiety the continued suspension of the fund will be causing you and I am extremely sorry for putting you in this situation.”

Let’s take a look at what this development means for investors.

A little bit of clarity

Naturally, this news of an extended suspension is going to be frustrating for many investors. Given that it’s still early August, we’re looking at the suspension lasting at least another four months. For those who need access to their money, the news is not good.

However, on the plus side, this announcement does bring a little clarity to the situation. As I wrote in early July, there was always a strong chance that the suspension could drag on for a number of months due to the fact that Woodford had to sell so many smaller companies. The worst bit though, for many investors, was not knowing how long the fund would be suspended for.

At least now we have some clarity. That said, there’s no guarantee that the fund will be opened in December, however, another four months should be long enough for Woodford to fully reposition the portfolio.

Fund repositioning

Once the fund is reopened, investors can expect to see a very different portfolio. In the recent update, Woodford said that investors will see a portfolio with “more FTSE 100 and FTSE 250 companies, but still reflecting the same investment strategy” and added that since the fund’s suspension in early June, up to 80% of proceeds from share sales have been reinvested in FTSE 100 companies. It will certainly be interesting to see which FTSE 100 names Woodford goes for.

Alternative options

Of course, when the fund does reopen, there is no requirement to remain invested in it. You may want to move your money into a new fund – there are plenty of other options. Two UK equity funds that I like, in particular, are the Lindsell Train UK Equity Fund, which focuses on high-quality stocks, and the Franklin UK Rising Dividends Fund. Both have performed well in recent years and are available on the Hargreaves Lansdown platform with low fee structures.

You could also look at investment trusts such as the City of London Investment Trust, which is a conservatively-run UK equity income investment with a good long-term track record, or alternatively, you could even look at putting together your own portfolio of dividend stocks.

Whatever you do though, ensure that your portfolio is fully diversified. The ultimate takeaway from the Woodford suspension is that when investing for the future, risk management is critical. Never put all your eggs in one basket.

The post The Woodford Equity Income fund could be locked until December. Here’s what you need to know appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Hargreaves Lansdown and City of London Investment Trust and has positions in the Lindsell Train UK Equity fund and the Franklin Rising Dividends fund. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Further, that in the absence of a change in the trajectory of redemptions from WEIF, “broker Hargreaves Lansdown (which holds it in its house funds and has controversially retained it on its influential Wealth 50 list of recommended funds for its clients) would surely have to pull the plug to limit its own reputational damage.”

You may have missed my article, but you can hardly have missed the avalanche of Woodford news over the last seven days. This began with the gating of WEIF, preventing investors withdrawing their cash. And, belatedly, Hargreaves Lansdown removed it from its Wealth 50 list.

Woodford has also lost his mandates to run funds for wealth managers St James’s Place and Omnis. With the Financial Conduct Authority, the Bank of England and politicians putting the collapsing House of Woodford under scrutiny, can the once-revered fund manager turn the tide?

Flagship

WEIF’s value has fallen from a peak of over £10bn to £3.7bn. As a result of redemptions, it’s had to sell-down its most liquid holdings, and now has a preponderance of unquoted and illiquid stocks. The gating of the fund is to allow Woodford time to dispose of these, and build enough cash and liquid holdings to meet redemptions when the fund re-opens.

I think this’ll take many months. Furthermore, as I’ve discussed in the past, there are suspicions Woodford’s unquoted stocks are in the books at over-rosy valuations. If so, this would likely be damagingly exposed in their sale. Even if it isn’t the case, he’ll need considerable liquidity to re-open the fund.

We know Kent County Council wants to withdraw £250m. There are also reports Hargreaves Lansdown is considering dropping WEIF from its multi-manager funds (around £600m). And there will inevitably be a rush of retail investors heading for the door, when — or, indeed, if — the fund is ungated. For the time being, investors are lobster-potted in WEIF, and can only wait.

Income Focus Fund

Woodford’s smaller (around £400m) Income Focus Fund (WIFF) remains open for dealing. However, Hargreaves Lansdown has also dropped this fund from its Wealth 50 list, advising investors who don’t need its high income to “consider their position.”

While WIFF holds no unquoted stocks, and is thus more liquid than WEIF, it’s not as liquid as many of its peers (for example, only three of its top 10 holdings are FTSE 100 stocks). Redemptions have accelerated to over £10m a day since WEIF was gated, and I see a real risk of WIFF also having to be shuttered.

Hospital case

Finally, Woodford Patient Capital Trust is a closed-end fund, so can’t suffer from redemptions. However, its shares have plummeted over the past week. They’re trading at 64p, as I’m writing — a 26% discount to net asset value — so the market is clearly viewing Patient as a hospital case.

Given it has a £150m overdraft, and vast exposure to unquoted companies (whose valuations I have doubts about), I’m more than happy to avoid WPCT.

The post The House of Neil Woodford is collapsing. Can he stop the rot? appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown and Woodford Patient Capital. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

So what can we — all Foolish investors — take from this nasty episode?

1. Don’t believe the hype

Go back a few years and Woodford’s record as a stock-picker was virtually unmatched.

Notwithstanding this, recent events remind us that past performance (still) isn’t any guide to the future and that anyone — star fund managers included — can make mistakes that threaten their reputations. 

Of course, Woodford’s troubles give those who favour low-cost passive investments more ammunition to argue that the vast majority of fund managers, even those with impressive backgrounds like his, aren’t worth investing in. Even if they do outperform, the fees they charge eat up a huge chunk of these gains anyway. 

If last week hasn’t put you off being in active funds, make sure that you’re not relying on the skills of just one person in the same way you wouldn’t rely on the success of one particular stock. A degree of diversification is always required. 

2. Know what you own

The problem with Woodford’s fund is that it was invested in a lot of illiquid holdings.

That’s fine when the going is good but it becomes a major problem when hard times hit because it means that a manager is forced to dispose of liquid (i.e. easily traded) stocks in order to satisfy redemptions as everyone runs for the exits.

This increases the amount of illiquid holdings in the portfolio, which puts it at risk of eclipsing limits imposed by regulators. So Woodford now needs to jettison these stocks too. 

I’d bet many of those invested in his flagship fund were unaware of all this, highlighting the importance of regularly checking that the person entrusted with managing your money is continuing to follow the strategy originally outlined.

3. Know your horizon

In addition to knowing the above, it’s also essential to consider how long you plan on leaving your money there. 

I’ve read reports of stressed holders who fear being unable to make up any losses because they’re already in their twilight years.

Without wishing to sound harsh, that’s not Woodford’s fault. That’s just bad risk management, either on the part of the holders or, if applicable, those advising them.

Put simply, if you have all your money tied up in shares, you must understand that you may get less back than you put in. That not a great position to be in if you’re already retired.

I’m certainly not advocating that anyone about to leave work for good should come out of equities completely, but the past week illustrates why a gradual move to less volatile assets is prudent. 

4. Be a quality-focused contrarian

Being “greedy when others are fearful” is good advice for long-term investors. Neil Woodford famously made his biggest gains when he bought big stakes in tobacco companies when everyone else despised them. 

But this Buffett-sourced sound bite misses out the importance of only buying stocks of sufficient quality (high returns on capital, good operating margins, low/no debt). Many of Woodford’s big bets, such as Purplebricks, AA and Capita fail this last test. 

If you are going to zig while others zag, make sure you go in with your eyes wide open.

The post 4 take-home messages from the Neil Woodford debacle appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

For example, Train’s Global Equity fund has returned around 90% over the last three years while his UK Equity fund has returned 40%, which are excellent figures. At the same time, Smith’s Fundsmith Equity fund has returned around 80%, which is also an excellent performance. On the other hand, Woodford’s Equity Income fund has lost around 10% over the last three years, which is clearly not such a good result for investors. So, who is the best fund manager to back in 2019?

Investment style

To answer that question, I think it’s worth looking at the investment styles of the different managers.

Smith and Train could be classified as ‘quality’ investors. Both fund managers tend to focus on high-quality companies that generate consistent growth, reinvest their earnings at a high rate, and pay regular dividends. This is quite a good strategy, in my view. Note that Smith’s fund invests on a global basis, while Train manages both a global fund and a UK fund.

In contrast, Woodford could be classified as a ‘value’ investor. He’s also very much a ‘contrarian’ investor meaning that he tends to go for companies that are out of favour. Moreover, his approach in recent years has been to pick out under-the-radar stocks in sectors such as healthcare and technology that are not on mainstream radars. His Equity Income fund is predominantly UK-focused.

Below is a look at the top 10 holdings of the four different funds, according to data from Hargreaves Lansdown. 

My pick for 2019 

Considering the different investment styles of the three portfolio managers, if I was to choose one manager to go with next year, it would probably be Train.

I like his approach to quality investing, and I’d be happy to own either his UK fund or his global fund, given that they both contain names such as Unilever, Diageo, and Heineken.

That said, I do like Smith’s quality investing strategy as well, although some of his key holdings such as Microsoft and Facebook trade at rather high valuations, which adds a little more risk.

On the other hand, I don’t see a huge amount of appeal in Woodford’s fund right now. I do think value investing could come more into focus in 2019, as the growth trade that we’ve seen in recent years appears to have broken down. However personally, I’m not convinced that Woodford’s fund is the best way to play the value theme. It’s a little too unorthodox for my liking, given that it contains a number of non-dividend paying growth stocks.

So perhaps I’d go with Train for UK equity exposure, and Smith for global equity exposure, in order to diversify a little. As with individual stocks, it can be a sensible idea to diversify with funds, as you don’t want to be overexposed to one particular manager in case they underperform.

The post Neil Woodford, Terry Smith or Nick Train: which fund manager should I back in 2019? appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Unilever, Diageo, Imperial Brands, Hargreaves Lansdown, and Schroders, and also has positions in the Fundsmith Equity Fund and the Lindsell Train Global Equity fund. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Facebook, PayPal Holdings, and Unilever. The Motley Fool UK owns shares of Microsoft and has the following options: short January 2019 $82 calls on PayPal Holdings. The Motley Fool UK has recommended Burberry, Diageo, Hargreaves Lansdown, Imperial Brands, InterContinental Hotels Group, RELX, and Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Ups and downs

CF Woodford Equity Income has fallen 4.6% over the past 12 months, while the UK All Companies sector rose a healthy 6.8%. That is on top of a fall of 1.3% in the year before that. Its performance has been bad, very bad.

UK house prices have just suffered their biggest monthly drop in six years, falling 0.5% in August, according to Nationwide. However, unlike Woodford, they are still up 2% over 12 months. There is now a danger that both could start falling at the same time.

Building bust

House prices are being hit by stagnating wages, rising interest rates, Brexit uncertainty and affordability concerns. London is falling, and although parts of the Midlands, North and Scotland are still doing well, concerned investors have been dumping housebuilding stocks in droves.

This is a blow for Woodford, because he has surprisingly chunky exposure to the sector. His flagship fund’s second-biggest holding is Barratt Developments, which makes up a hefty 5.63% of his fund. Online estate agency Purplebricks makes up another 2.8%.

Property shock

Another stock, Taylor Wimpey, has just slipped outside of the top 10, although last time I looked it made up 2.71%. This means that around 10% of his fund is invested in just three stocks with full-on exposure to the residential housing market. Also in the top 10 is specialist listed real estate investment trust, NewRiver REIT, which focuses primarily on retail and leisure property and contributes another 2.74%. This is commercial rather than residential, but even so.

I was surprised by this exposure, I had never thought Neil Woodford was that into property. I will admit that I have been tempted by the sector as well, earlier this year I said prices may continue to be underpinned by supply shortages and pent-up demand. You can add low interest rates and government schemes such as Help to Buy to that list.

That’s going to hurt

However, when I look at the performance of these four property stocks, I shudder, because every single one has notched up double-digit losses. Barratt’s share price is down 12% in the last 12 months. Taylor Wimpey is down 14%. NewRiver REIT is down 24%, while Purplebricks has crashed by a whopping 36%. This is at a time when house prices are still rising. If prices start falling, things could get even uglier.

Others saw the danger coming. I have been looking at user comments on the Woodford Funds website and found this gem from a disgruntled former investor on 10 Sep 2017: “The housebuilder ramping was my signal to sell up…. he piles into housebuilders, land and brick companies at the peak of the economic cycle?… there is only one way for these companies to go, and that is down.” Ouch.

Perhaps this is another of Woodford’s famed contrarian plays. Would you like to bet on it, though?

The post Here’s why a house price crash could wipe out Neil Woodford appeared first on The Twelfth Magpie.

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harvey holds CF Woodford Equity Income. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It’s no secret that Woodford’s performance over the last two-to-three years has been poor. Successful investing is as much about avoiding big losses as it is about generating big gains, yet in Woodford’s case, the portfolio manager has experienced one investing disaster after another. Provident Financial, Capita, Prothena, AA, Eve Sleep… the list goes on.

Bottom of the pile

So just how bad has Woodford’s performance been relative to his peers? I won’t sugarcoat this – it’s been bad. Really bad.

Analysing the performance figures of all the equity funds in the ‘UK All Companies’ sector available through investment platform Hargreaves Lansdown, Woodford’s Equity Income fund is the worst-performing one out of the 286 funds listed, over a one-year investment horizon, with a return of a poor -9.6%.

And it gets worse. Of the 261 UK All Companies equity funds on Hargreaves Lansdown with a three-year performance track record, Woodford’s Equity Income is the worst performer there too. There’s no denying that Woodford’s performance has been truly terrible. And this has been so for a while now.

Some of the best-performing funds in this sector have generated returns of 70% or higher over the last three years. For example, the Chelverton UK Equity Growth fund has returned 76% in just three years. CFP SDL UK Buffettology has returned 69% in just 36 months. And Nick Train’s UK Equity fund has returned 49% in this time. Clearly, Woodford is far behind his peers. So what should investors do?

Understand Woodford’s investment style

The first thing to understand about mutual fund investing is that almost all portfolio managers experience periods of underperformance at some stage throughout their careers. So Woodford’s recent woes, while incredibly frustrating, are not necessarily a reason to panic. The portfolio manager may be able to turn things around.

Having said that, it’s also important that investors understand his investment style. Woodford’s Equity Income fund is not an ‘orthodox’ operation. In fact, it was recently booted out of the equity income fund sector because its dividend yield was too low.

Whereas most equity income funds tend to focus on stable, large-cap dividend-paying companies, much of Woodford’s portfolio is invested in smaller companies that don’t pay dividends. This is a certainly a more unique investment management approach and one that is riskier too, given the number of smaller companies in the portfolio. A portfolio like this will often perform differently to the market in general.

Whether you stick with Woodford going forward is up to you. My advice is to take a closer look at the portfolio manager’s investment strategy, determine whether you’re comfortable with his approach, and then make a rational decision as to whether you believe he can turn things around. There are plenty of other good funds to invest in if you’re looking to diversify your capital. 

The post If you’re invested in Neil Woodford’s Equity Income fund, read this now appeared first on The Twelfth Magpie.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Losing patience

After a blistering debut, his eponymous vehicle Woodford CF Equity Income has trailed its sector horribly, falling 13.4% over the last 12 months and his £650m vehicle Woodford Patient Capital Trust (LSE: WPCT) has done even worse, falling 15.1% over 12 months, against a 5.1% rise on the All Companies sector.

I hold his equity income fund and am staying loyal for now. As markets turn volatile, his focus on dividend-paying stocks could prove its merits, provided he avoids more reputation-crunching disasters such as doorstep lender Provident Financial. However, I also share Edward Sheldon’s concern that it has strayed away from its original intention.

Loss of trust

I never had much time for Woodford Patient Capital Trust, launched in April 2015, which saw the dividend hero stray into uncharted (for him) small-cap territories, presumably hoping his reputation would see him through. Instead, his reputation has been sunk.

In the early, heady days this trust traded at a premium of as much as 4%, but today it is at a deep discount of 9.59% as investors lose heart. It has also changed tack, taking on more risk rather than less. Solid FTSE 100 companies have been ditched, while the limit on unquoted companies has been enlarged from 60% to 80%, as GA Chester points out here.

Almost half of the fund is invested in just six stocks, with its biggest holding Oxford Nanophore making up a whopping 10.1% of the fund (and down 54% over three years). The next five, Prothena, Purplebricks, Benevolent AI, Immunocore A and Proton Partners International are all at the higher end of the risk scale. This would be fine if the trust was shooting out the lights like so many smaller company funds right now, but it isn’t.

Rude heath

If you want to invest in smaller biotechnology and healthcare stocks, I would suggest an investment trust that has a proven long-term track record in this area, the Worldwide Healthcare Trust (LSE: WWH) launched in April 1995.

If you had invested your full allowance in the fund every year since 1999 you would now have a whopping £794,856, according to the Association of Investment Companies. It is up 28.7% over the last three years, Trustnet shows (which looks even more impressive when set against Woodford’s double-digit loss), and 152% over five years.

Global spread

Worldwide Healthcare Trust invests in a diversified portfolio of global pharmaceutical and biotechnology stocks for capital growth. It uses gearing and derivative transactions to enhance returns and mitigate risk, and holds a wider spread of stocks including established names such as Merck & Co (its top holding at just 4% of the portfolio), Novo Nordisk and Bristol-Myers Squibb

Worldwide Healthcare Trust isn’t directly comparable to Woodford’s UK-focused fund, with roughly two-thirds invested in North American equities, and holdings across Europe, emerging markets and Asia Pacific. It is in demand, trading at a slight premium of 0.94. Woodford may have lost his admirers but this fund certainly hasn’t.

The post Why I’d shun Woodford Patient Capital Trust and buy this super investment trust appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Understandably, many are unhappy. His performance in 2016 was poor as well, with the fund returning 3.2% vs the index’s 16.8%. At a time when making money in the stock market has been relatively easy, the UK’s most celebrated portfolio manager has bombed out big time.

This underperformance highlights the fact that even the best money managers experience challenging periods. Woodford has an excellent long-term track record, but in the last few years, he has dramatically underperformed his peers.

So what’s the lesson here?

Diversify your funds

To my mind, this highlights the importance of diversification. It’s a topic I’ve been banging on about quite a bit recently.

The bottom line is that diversification is an extremely important wealth management concept. Yet many investors fail to do it properly. They don’t have a thorough understanding of what it means to be diversified.

It means more than just buying a handful of stocks. It means buying stocks in different sectors, across different geographical regions and of different market capitalisations. Importantly, if you invest in funds, it means spreading your capital out across several different funds too.

I’ve got no doubt there are plenty of investors who backed Woodford with all their capital, believing they were fully diversified. After all, the portfolio holds over 120 stocks. They’ll be frustrated right now, after a 4% return in two years.

A better strategy would have been to back several different fund managers. This way, the risk of one portfolio manager underperforming is dramatically reduced.

Safety in numbers?

Looking at my own SIPP, I currently hold four funds. These include the Lindsell Train Global Equity fund, the Threadneedle European Select fund, the Rathbone Income fund, and Woodford’s Equity Income fund.

As a result, while Woodford’s recent underperformance was frustrating, my portfolio still did pretty well over the last 12 months. Nick Train’s global fund returned 26.1% for the year – an excellent performance. Similarly, the Threadneedle European fund returned 19.6% last year – another strong return. The Rathbone Income fund’s return was a little weaker at 8.5% for the year, but given that it has generated a return of 29.3% over three years, I’m not too concerned. Diversifying across several funds ensured that I didn’t suffer too much from Woodford’s poor performance.

Could I diversify further? Absolutely. As my SIPP grows, I’ll be looking to diversify my global equity and European funds across several different portfolio managers. I’m also keen to add some small-cap funds and diversify my geographic exposure, by adding some emerging markets funds. When it comes to long-term investing success, diversification is a fundamental concept that shouldn’t be ignored.

The post Neil Woodford’s recent performance highlights the importance of diversification appeared first on The Twelfth Magpie.

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However, while Woodford’s historic returns are some of the best around, recently his performance has started to slip. 

According to FE Trustnet, a lack of performance in recent years has pulled Woodford’s long-term total return back to earth. His annualised return over the past 17 years has dropped to 8.5%. What’s more, 2016 was one of worst years on record for him as his £9.6bn Woodford Equity Income fund failed to outperform the FTSE All-Share by a staggering 13.6% throughout the year. 

And 2017 looks as if it’s going to be yet another poor year for the fund manager. 

Struggling to maintain performance

2017 has got off to a bad start for many reasons. For a start, his long-awaited second income fund, which launched earlier this month only attracted £500m in cash from investors. This total, while impressive, is around one-third of the funding of his previous offering, suggesting investors have reached ‘Woodford saturation’. 

Only a day after the news that the new fund had struggled to attract interest from investors hit the headlines, the star fund manager announced that he was seeking shareholder approval to adjust the investment rules for The Woodford Patient Capital Trust, which invests mainly in early-stage UK companies. Like his other fund, Patient Capital underperformed its benchmark during 2016, delivering a net asset value loss of 4.2% for the year against the FTSE All-Share return of 16.8%. Woodford is seeking investor approval to change the fund’s investment strategy to allow it to hold more investments outside the UK, increase borrowing and invest as much as 80% of the portfolio in unlisted companies, up from the current 60% restriction. 

Unquoted issues

Woodford may believe in his ability to pick unquoted companies, but his record for this strategy is seemingly getting worse every week. 

Last week Northwest Biotherapeutics, a private corporation in which Woodford’s fund has invested £140m, warned that it might not be able to continue to function without a further cash infusion and is being investigated by regulators. This disaster follows the announcement that Circassia, another early-stager in which Woodford has invested, halted investment in its allergy programme after a second failed clinical trial. 

As well as these disasters, shares in one of his largest holdings, Allied Minds, plunged earlier this month when the company warned that it was taking a $147m charge as it exited some start-up businesses. 

Unforgivable 

This torrent of bad news has cast a shadow over Woodford’s reputation, and while it is natural for fund managers to have good and bad years, underperforming during a strong bull market is almost unforgivable.

One has to wonder if he cannot match the market during a bull market, what happens when the market reverses course?

In other words, even though Woodford has a stellar investment record, recent performance suggests he may be losing his edge and with so many other opportunities out there, hunting for other fund managers to look after your wealth may not be the worst idea.

The post After 3 decades of success, is Neil Woodford losing his touch? appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Stormy weather

Woodford has been through rough waters before, as you would expect with a manager who is happy to swim against the tide, and has always emerged with his reputation enhanced. I expect him to do it again, but it is always worth checking out the competition. Different fund managers have different styles and invest in different stocks, giving you much-needed diversification. The following two have outpaced Woodford over the last year, although they may not always do so.

Ben Whitmore’s £2.3bn Jupiter Income Trust is a minnow next to Woodford’s £10bn giant. But small is beautiful with the fund returning 23% in the past year, and 75% over five years. It has some crossover with the Woodford vehicle, both feature pharmaceutical stocks AstraZeneca and GlaxoSmithKline, although these two make up a whopping 16.48% of Woodford’s total fund, more than double Jupiter’s 7.7% exposure. Woodford has also gone massive on tobacco stocks, with a 14.21% total weighing in Imperial Brands and British American Tobacco, far greater than Jupiter.

Going global

These are Woodford’s hits. His misses include ignoring oil and commodity stocks, which enjoyed a bumper 2016, and going big on outsourcing company Capita Group, whose share price halved. He also shunned the banks while Whitmore has a 4.8% stake in HSBC Holdings, which leapt 50% in the last year.

Jupiter Income is 100% invested in the UK, Woodford Equity Income is around 14% exposure to other countries, notably the US, with smaller stakes in Norway, Ireland, Luxembourg and Switzerland. Robin Geffen’s Neptune Income has even greater US exposure at 20%, and its top 10 holdings feature no less than five US stocks: Microsoft Corporation, derivatives marketplace CME Group, JP Morgan Chase & Co, Wells Fargo & Co and Johnson Matthey.

Sector splits

Neptune Income therefore gives you greater diversification, with a completely different top 10 to Woodford. It also has has more energy exposure with a 3.34% stake in Royal Dutch Shell, and 3.26% in Rio Tinto. Geffen has returned 20% over the past year, and 55% over five years. 

Drilling down further, Woodford has 36.85% exposure to healthcare and 28.33% in financials, but has next to nothing in technology, consumer services, utilities or telecommunications. Jupiter Income has 25% in financials and 20% in consumer services, but then has a much more even spread of sectors. It is a similar story with Neptune, which has major financials exposure at 34%, followed by a broad spread across the sectors. You can see which man is making the big calls here: Woodford. Next year those calls might pay off.

Three-way bet

Finally, the income. Neptune is the high highest yielding of the three, returning 4.66% a year, beating Jupiter’s 3.5% and Woodford’s 3.17%. So a spread of all three funds may give you better balance than going all-in on Woodford.

The post 2 income funds that have thrashed Neil Woodford appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Harvey Jones holds units in CF Woodford Equity Income but has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca, BP, HSBC Holdings, Imperial Brands, Rio Tinto, and Royal Dutch Shell B. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.