Evan-Cook says that part of his process involves looking for smaller funds with lesser-known managers that are already displaying the ability to outperform but have yet to catch the eye of the market.
He highlights five candidates that have similarities to Woodford in terms of philosophy and process and that he expects to outperform the market in the longer term.
“We look to have a portfolio of active funds that put together looks different from the market in terms of what it holds,” he said.
“As value investors, we look for fund managers that care about the price they’re paying for companies and are not concerned by benchmarks, a key shade of Woodford’s approach to value investing,” he added.
“We absolutely have to have managers that are truly active, we won’t hold any that are benchmark-huggers, because if you want to beat a market, you have to be different from that market.”
“It won’t be 3 per cent every year, some years it might be 6 per cent or 0 per cent, but over the course of that period they’ll perform well.”
Wise Investments Evenlode Income
This £45m fund in the UK Equity Income sector is run by Hugh Yarrow.
“If you look at the way Hugh Yarrow manages his fund, it is very similar to the way Woodford runs his funds,” Evan-Cook said.
“He doesn’t care about the benchmark; it’s about bottom-up stock picking.”
“He is looking for high quality companies that are looking to grow their dividends over the longer term and not pay too much for them, which is very much the ethos of what Woodford does.”
“He’s not as small cap focused as Neil Woodford was so doesn’t have the potential to match the early Woodford years, but he’s more than capable of outperforming by 2 to 3 per cent per year.”
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
According to data from FE Analytics, the fund has returned 50.02 per cent over three years compared with a sector average of 40.71 per cent.
It requires a minimum investment of £1,000 and has ongoing charges of 1.75 per cent.
Baillie Gifford European
For his third choice, Evan-Cook likes this £128m European fund managed by Tom Coutts, Paul Faulkner and Stephen Paice.
“This fund’s much more about finding what they consider to be the best companies and holding on to them. They’re less concerned about valuation than others,” said Evan-Cook.
“They give a great deal of thought to their investment philosophy, which is that the very best companies will continue to compound away performance and therefore the fund has a very low turnover.”
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
According to data from FE Analytics, the fund has returned 38.64 per cent over three years compared with a sector average of 26.76 per cent.
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.5 per cent.
Prusik Asian Equity Income
This is an FCA offshore fund that is domiciled in Ireland but targets growth in Asia. It is managed by Tom Naughton.
“Naughton’s philosophy and process are about finding the best Asian companies that pay an income but making sure he doesn’t overpay for holding them,” said Evan-Cook.
“He has already shown since he launched the fund, despite not worrying about his benchmark, that he can vastly outperform his own market, and we expect him to continue to do that.”
Performance of fund vs sector and index since launch
Source: FE Analytics
According to data from FE Analytics, It has returned 47.17 per cent since it was launched in December 2010, outperforming its MSCI Asia Pacific ex Japan index which has returned less than 0.5 per cent.
Evan-Cook says that Naughton may well be his favourite manager of the five.
“Prusik manager Tom Naughton has done a particularly exceptional job,” he said.
“He’s brutally honest about what’s going right and what’s going wrong, which is very attractive for us, so you won’t make mistakes twice. He’s got every chance of performing as well as Neil Woodford.”
The fund requires a minimum investment of $10,000, which makes it difficult for retail investors to access at the moment.
Charlemagne Magna Emerging Markets Dividend
Like Prusik Asian Equity Income, Evan-Cook says the manager of the Charlemagne Magna Emerging Markets Dividend fund has a similar style to Woodford's.
“It has no concern with trying to match a benchmark and it holds good companies that pay a dividend and makes sure to not have to pay for holding those companies.”
The fund is co-managed by Julian Mayo and Mark Bickford-Smith, who joined in January 2012.
“We’ve followed Charlemagne for quite some time and we think Mark Bickford-Smith added the necessary discipline to what was already a good boutique,” said Evan-Cook.
“Combining that discipline with the good analysis they already had and sticking to investment fundamentals have helped them to beat their market, which they already have done.”
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
According to data from FE Analytics, the £135m fund has returned 11.94 per cent over three years, compared with a sector average of 6.27 per cent.
Premier’s David Hambidge told FE Trustnet recently he was using the fund to dip his toes back into emerging markets in his funds of funds.
The fund is available through select platforms.
Coupland Cardiff Japan Income & Growth
This relatively new fund, launched in January 2013, offers concentrated exposure to Japanese equity markets, holding just 35 to 40 stocks.
It is managed by Richard Aston.
“We’ve only been holding this unconstrained fund for a couple months,” Evan-Cook said.
“It doesn’t care what’s in the benchmark and looks at the entire Japanese market. The fund manager also ensures they are holding the best income-paying companies also likely to grow their income over time.”
“They make sure that businesses are likely to grow and therefore their income is likely to grow over time also. That’s a good recipe, not just for anyone looking to achieve income but total return also.”
“This means they are not in the value trap of looking for companies that pay a high income now, but that will drop off the income they pay over time.”
Performance of fund since launch vs sector and index
Source: FE Analytics
According to data from FE Analytics, the fund has returned 25.04 per cent over three years, compared with a sector average of 11.74 per cent.
It is not currently available to retail investors.
