Neil Woodford’s SJP UK High Income portfolio is a top-decile performer in its IMA UK Equity Income sector year-to-date, according to FE data, operating with significantly less volatility and downside risk than its peer group as well. All eyes are on Woodford’s newly launched CF Woodford Equity Income fund, which will only start trading in mid-June. Given Mark Barnett has taken over Invesco Perpetual Income and High Income, as well as the Edinburgh IT, those looking to track the performance of the FE Alpha Manager have been presented with a problem.
Woodford (pictured) is currently a named manager on one portfolio though – the £1.4bn SJP UK High Income fund, which has posted returns of 7.4 per cent so far this year. This compares to 3.34 per cent from the IMA UK Equity Income sector average, and 2.58 per cent from the FTSE All Share.
Only two UK Equity Income funds have returned more.
Performance of fund, sector and index in 2014
Source: FE Analytics
The SJP fund is also ahead of now rival Barnett’s Invesco Perpetual Income and UK Strategic Income funds, which are up 5.2 and 6.7 per cent respectively so far this year.
It’s been a much smoother ride in SJP UK High Income as well, with Woodford protecting more effectively against the downside during the numerous mini sell-offs this year. Outperformance in times of market stress has been a key feature of the manager since he started running money in the early 1980s.
Our data shows the fund has a max drawdown of 3.7 per cent so far this year, compared to 4.33 per cent from the FTSE All Share.
While the time frame is very short-term, particularly for a manager as long-term as Woodford, it is undoubtedly encouraging for investors that the fund has held up well during a period of uncertainty for markets.
As well as making a good start to the year, the fund is also ahead of the All Share over one, three, five and 10 year periods.
SJP UK High Income was always very similar to the make-up of Invesco Perpetual Income and High Income, though doesn’t have anywhere near as much in international holdings. CF Woodford Equity Income is expected to again have very similar stock and sector weightings.
Among the biggest contributors to performance year-to-date is AstraZeneca, which is up more than 24 per cent year-to-date. The pharma giant was subject to a bid from US firm Pfizer, but the deal has since gone cold.
Performance of SJP UK High Income’s top-10 stocks in 2014
Source: FE Analytics
However, Woodford has added to his position in the company following the sharp sell-off in late May. SJP UK High Income has an 11.08 per cent weighting in the firm, making it his largest single-stock position.
Other key contributors include British American Tobacco, Imperial Tobacco and Capital, which have all returned significantly more than the FTSE All Share this year.
The manager’s high conviction style, which leads him to back his best ideas with significant weightings, has meant these gains have had a particular impact on the fund’s performance.
With the exception of Rolls Royce which suffered a surprise earnings downgrade, the rest of the top-10 has been in touching distance of the FTSE All Share this year.
Source: FE Analytics
A smaller weighting in Smith & Nephew has also been a big contributor to performance; FE data shows the stock is up 25.05 per cent in 2014.
Barnett has made significant changes to his Invesco income funds and the Edinburgh IT since taking over from Woodford earlier this year.
Talking in May, he said he had cut back on some of Woodford’s biggest bets in the trust including AstraZeneca, BT Group, Capita and Reckitt Benckiser, and added the likes of Babcock International, Beazley, Brown, BP and Thomas Cook as new holdings.
The strong performance of Astra and Capita has weighed on performance, and the likes of Thomas Cook and N Brown have had a tough time of it of late. However, BP and Compass have been stronger performers.
Since taking over the trust in late January, the Edinburgh IT is ahead of its FTSE All Share benchmark with returns of 7.82 per cent. It is also ahead on a net asset value (NAV) basis.
Performance of trust and index since 28 Jan 2014
Source: FE Analytics
FE Trustnet commented on the strong performance of Invesco Perpetual Income and High Income since Woodford’s resignation in October 2013 last month.
City Financial’s Peter Toogood has become the latest in a long line of experts who has expressed a keen interest in Woodford’s CF Woodford Equity Income fund.
“Our initial thoughts about the business and the fund are positive,” he said.
“The infrastructure supporting the existing mandate and the new fund launch are robust. It is very encouraging to see a mix of experienced people in the business with different skills, with full acknowledgement given to the importance of their individual roles.”
“The continuity of the investment approach seems assured. There is a determination for the investment team to be focused and not be distracted by the wider business issues.”
Barnett is not without his admirers, however. Three Counties’ Andrew Alexander and Cannacord Genuity’s Justin Oliver have both bought the manager’s Invesco Perpetual UK Strategic Income fund in recent months.