One year after launching IC Top 100 fund CF Woodford Equity Income (GB00BLRZQ513), star manager Neil Woodford has been crowned the best performer in the UK equity income sector, with a fund return of nearly 20 per cent from June 2014 to June 2015.
Mr Woodford's fund returned 19.6 per cent between its first day of trading on 19 June 2014 and 4 June 2015, 10.3 per cent more than the UK Equity Income sector average. That means that that in just one year, the fund has already turned £10,000 of investors' money into £11,960.
Since leaving Invesco Perpetual last year, Mr Woodford has repeatedly topped the Investment Association (IA) UK Equity Income sector. He ended last year at the top of the sector just six months after launching the fund with returns of 7.5 per cent compared with 7.3 per cent for next best performer, Majedie UK Income Fund (GB00B7FRND86).
Laith Khalaf, a senior analyst at Hargreaves Lansdown, said the fund's success was due to a mixture of stock selection and sector positioning, with Mr Woodford's selection of smaller growth companies and large, high-yield companies producing particularly strong returns.
Small caps accounted for about 40 per cent of performance despite making up only 15 per cent of the fund, and over a period when small-cap growth stocks lost money.
Small exposure to oil and gas and exposure to healthcare, financials and consumer goods stocks have also benefited the fund. Of the top 10 performing funds in the sector his weighting to healthcare is double that of the next highest, 34 per cent compared with 17.6 per cent for Miton Income (GB00B1RQN640).
Woodford Equity Income has been hugely popular with investors of all ages and, according to Hargreaves Lansdown, over a fifth of Hargreaves investors taking advantage of new pensions freedoms have invested in it.
But Brian Dennehy, managing director at FundExpert.co.uk, said the fund could face issues in the future due to its size. It is already the second largest in the UK Equity Income sector and no fund over £1bn in size made it into the top 10 performing funds between May and June 2015, according to Fundexpert. Large fund sizes can be tricky for managers who need to make large investments in order for them to really have an impact, and Mr Dennehy said that could mean Mr Woodford might struggle to remain in the top 10.
Mr Khalaf also said diversification remained important, no matter how strong the manager. He said: "Neil Woodford is clearly an accomplished manager, but we would always suggest investors broaden their portfolio beyond one fund." Hargreaves Lansdown suggests JO Hambro UK Equity Income (GB00B95FCK64), Marlborough Multi Cap Income (GB00B908BY75) and Newton Global Income (GB00B8BQG486) as other top UK equity income options.
Performance of Woodford Equity income and other top and recommended UK equity income funds
| Fund | Total return 19 June 2014 - 4 June 2015 |
| CF Woodford Equity Income A Acc | 19.6 |
| JOHCM UK Equity Income B Acc | 10 |
| Majedie UK Income B | 19.5 |
| Marlborough Multi Cap Income A Acc | 13.7 |
| Newton Global Income B Acc | 9.5 |
| Sector: UT UK Equity Income Retail | 9.2 |
Source: FE Trustnet, as at 9 June 2015
