Fund analysts are urging investors to hold back from selling Neil Woodford’s flagship CF Woodford Equity Income Fund (GB00BLRZQB71) after it emerged last week that Jupiter, one of the UK’s largest asset managers, had pulled hundreds of millions of pounds from the fund.
John Chatfeild-Roberts, head of Jupiter Asset Management’s Merlin funds range, is understood to have been cutting his stake over the past two years— from a peak of more than £900m in 2015 — and withdrew his remaining funds in September, reversing 20 years of support for Mr Woodford.
Jupiter has not commented on its motives for leaving and commentators said investors should not take it as a reason to exit the fund, despite Mr Woodford's recent spell of poor performance. Mr Woodford has suffered a difficult few months after the share prices of a number of his holdings fell sharply this summer. These included troubled doorstep lender Provident Financial (PFG, which saw its share price plummet nearly 70 per cent in August, and AstraZeneca (AZN), which tumbled 15 per cent in July after a drug trial disappointment.
CF Woodford Equity Income, which Mr Woodford launched in 2014, is currently in the bottom quartile of the Investment Association’s UK Equity Income sector over one and three years.
Rory Maguire, managing director at Fundhouse, said: "We do not know why Jupiter has left and there is nothing to suggest to us that he has changed his process or the way he manages money. Neil has been managing money for a long time and has always put a significant amount of capital behind his ideas. That creates the upside that he has delivered over time, but also makes it more painful when things go wrong."
Darius McDermott, managing director at Chelsea Financial Services, said: "On the third year anniversary of the fund, it was in the top quartile in the sector. Since then, Neil Woodford has had a short-term period of underperformance as all managers do, so we see no reason for his loyal followers to do anything, as he’s made a lot of money for them over a very long period of time."
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "While Neil Woodford has definitely had a troubled time of late, in our view his long-term track record speaks for itself." Hargreaves continues to include the Woodford equity income fund in its Wealth 150 Plus list of favourite funds.
Commentators suggested that Mr Woodford's contrarian positive view on the domestic UK economy could have contributed to Jupiter's decision. Mr Woodford has been increasing his exposure to more cyclical stocks and has been adding housebuilding, property and construction stocks to his portfolio in 2017, including Barratt Developments (BDEV), Taylor Wimpey (TW) and British Land (BLND). He has also reversed his formerly bearish view on UK banks and bought into Lloyds Bank (LLOY).
Mr Khalaf said Jupiter could have taken a diverging view on the UK economy following the UK's Brexit vote.
"There could be any number of reasons why Jupiter has made this sale, ranging from asset allocation through to a call on Woodford’s contrarian confidence in the UK economy," said Mr Khalaf. "The Merlin team is well known for taking big-picture macro decisions alongside fund manager selections, and it also has to consider the balance of its portfolios, which can prompt fund sales and purchases."
Jonathan Miller, head of UK manager research at Morningstar, said: "Woodford has made big calls in the past and is known more for being defensive. The portfolio does now include more cyclicality and is contrarian, but we haven’t changed anything on our positive view based on that.
"This is a manager who has had tough periods in the past, but generally made good calls on the top-down picture and a few months of underperformance are not enough to change our view."
Mr McDermott's firm has been trimming exposure to the UK because of doubts over the economic outlook for the UK, but FundCalibre continues to hold CF Woodford Equity Income Fund in client portfolios and includes it on its list of elite rated funds.
