While the star manager's funds continue to be among the most popular choices for income-seekers, Tim Cockerill, head of collectives research at Rowan Dartington, believes that Invesco has another ace in its pack.
"I’ve been looking increasingly to Invesco Perpetual UK Strategic Income," he said. "You get all the advantages of having access to the highly experienced and proven equity team at Invesco without the problems associated with fund size."
In terms of performance, while the Income and High Income portfolios have a better record over the last decade, FE Alpha Manager Mark Barnett’s fund has outstripped both of Woodford's over the medium-term.
Data from FE Analytics shows that the UK Strategic Income fund has returned 20.56 per cent over the last five years compared with respective returns of 16.18 per cent and 17.39 per cent from the Income and High Income funds. It has also beaten Woodford’s funds over three years.
Performance of funds over 10-yrs
| Name |
1-yr (%) |
3-yrs (%) | 5-yrs (%) | 10-yrs (%) |
| Invesco Perp - UK Strategic Income |
10.12 |
60.31 |
20.56 |
90.97 |
| Invesco Perp - High Income |
14.37 |
58.35 |
17.39 |
131.77 |
| Invesco Perp - Income |
14.1 |
57.47 |
16.18 |
127.64 |
| IMA UK Equity Income |
4.71 | 64.02 |
2.2 |
67.32 |
Source: FE Analytics
Cockerill says that while the Income and High Income funds were originally intended to offer investors slightly different mandates depending on people’s income objectives, now the size of the funds is limiting the stocks they can invest in.
"As far as I can see there is essentially no difference," he added. "If you wind the clock back 10 or more years then you’d see that one would have had a significantly higher yield but now they have reached a certain size, Woodford has a limited choice of stocks available to him that fit his philosophy."
According to data from FE Analytics, Woodford's Income and High Income funds returned 8.59 and 8.99 per cent respectively in 2011, making him one of the top-performing equity managers operating in the UK market.
While the funds’ performance figures suggest few problems, AWD Chase de Vere’s Patrick Connolly says it makes sense to buy a fund that has the option of investing in a wider universe, but he says anyone who already has exposure to Woodford should stay put.
"You need to drill through and see how much similarity there really is between the funds but on the face of it the argument has some merit," he explained. "If you believe in the team at Invesco then there is a good case for investing in the more nimble fund. However, Woodford could well be the one exception to the rule. He has an exceptional long-term track record and I would be reluctant to move from such a trusted manager, even to a fund managed with input from him and the rest of his team."
A quick glance at the top-10 holdings of the UK Strategic Income portfolio and the similarities are immediately obvious. Woodford favourites British American Tobacco, GlaxoSmithKline and Vodafone all feature.
However, Invesco Perpetual UK Strategic only has a 3.93 per cent weighting to Glaxo while the Income fund has 7.92 per cent. The smaller fund also has more holdings.
In terms of stability Barnett’s fund is also almost identical. Over the last three years it has an annual volatility score of 10.16 per cent while the Income fund has a score of 10.36 per cent and the High Income product 10.18 per cent.
The yield on the UK Strategic Income portfolio is slightly lower at 3.61 per cent compared with 3.79 per cent from the High Income portfolio and 3.67 per cent from the Income fund.
With a total expense ratio of 1.18 per cent compared with 1.68 per cent from Woodford’s funds, Barnett’s fund is considerably cheaper.