Neil Woodford: a summer in perspective

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Mitchell Fraser-Jones 6 September 2017 Est. reading: 19 min read

Home > Words > Blog > Neil Woodford: a summer in perspective

In June, the CF Woodford Equity Fund reached its three-year anniversary meeting investors’ return expectations over that time period. However, during July and August several of the fund’s holdings suffered significant share price weakness which has impacted the fund’s performance since. We have always encouraged dialogue with our investors and understandably some have been in touch, not only to express their disappointment, but also to seek answers as to why the fund’s performance has suffered. In the following video, Neil explains events and what they mean for the fund’s strategy…

2017: A challenging year so far...

Year to date

  • Woodford Equity Income Fund +0.59%
  • FTSE All Share index +8.21%
  • Underperformance -7.63%

Fund performance – year to 31 August 2017

Source: Financial Express, Woodford

Standardised performance (%)
  01/07/12
to 30/06/13
01/07/13
to 30/06/14
01/07/14
to 30/06/15
01/07/15
to 30/06/16
01/07/16
to 30/06/17
CF Woodford Equity Income (C Acc) - - 16.93 2.35 16.00
FTSE All Share index 17.93 13.12 2.60 2.21 18.12

Past performance cannot be relied upon as a guide to future performance.
Source: Financial Express on a total return basis, with net income reinvested.

...But it's not just about stock specifics

  • Provident Financial accounts for broadly half of underperformance
  • AstraZeneca, despite its Mystic trial data, has provided a positive contribution to the fund
Fund stock level performance — year to 31 August 2017
Stock Portfolio % Contribution %
AstraZeneca 8.51 +0.64
Provident Financial 4.83 -3.75

Source: Northern Trust

View the full stock contribution analysis (over 1 year to 30 June 2017)

...Market leadership has remained very narrow

  • 8 stocks account for over half of FTSE All Share gains this year (4.15% total return)
  • HSBC, Unilever, Diageo, Glencore, Rio Tinto, Vodafone, Prudential, British American Tobacco
  • 650 stocks make up the rest of the gains (4.06% total return)

2017 FTSE All Share index performers

Source: Bloomberg

UK domestic cyclicals remain out of favour

Valuation premium of UK domestic stocks vs UK exporters

  • +15.8% average since 2009
  • +10.6% before Brexit vote
  • -9.6% now

UK domestic stocks trade at a rare valuation discount to UK exporters

Source: Morgan Stanley

Healthcare bear market continues

FTSE All Share index sector performance

  • -0.6% Pharma & Biotech sector
  • +23.6% Mining sector

Two-year bear market in healthcare leaves stocks cheaper than they have been in many years

Source: Atlantic Equities

China has a substantial bad debt problem

China – estimated bad debt problems as % of GDP

Source: The MacroStrategy Partnership

“The short-term performance is painful and is difficult, but it isn’t a permanent loss of capital. I can, and I believe I will, rebuild the performance and rebuild that capital that we’ve lost recently.”

— Neil Woodford

Sources: FE Analytics, Woodford, Northern Trust, Bloomberg, Morgan Stanley, The MacroStrategy Partnership.

Data to 31 August 2017 unless otherwise stated.

What are the risks?

  • The value of the fund and any income from it may go down as well as up, so you may get back less than you invested
  • Past performance cannot be relied upon as a guide to future performance
  • The annual management charge is charged to capital, so the income of the fund may be higher but capital growth may be restricted or capital may be eroded
  • The fund may invest in other transferable securities, money market instruments, warrants, collective investment schemes and deposits
  • The fund may invest in overseas securities and be exposed to currencies other than pound sterling
  • The fund may invest in unquoted securities, which may be less liquid and more difficult to realise than publicly traded securities

Important information

Before investing, you should read the Key Investor Information Document (KIID) for the fund, and the Prospectus which, along with our terms and conditions, can be obtained from the downloads page or from our registered office. If you have a financial adviser, you should seek their advice before investing. Woodford Investment Management Ltd is not authorised to provide investment advice.

Woodford Investment Management Ltd is authorised and regulated by the Financial Conduct Authority (firm reference number 745433). Incorporated in England and Wales, company number 10118169. Registered address 9400 Garsington Road, Oxford OX4 2HN.

Woodford Patient Capital Trust plc is incorporated in England and Wales, company number 09405653. Registered as an investment company under section 833 of the Companies Act 2006. Registered address 40 Dukes Place, London EC3A 7NH.

The Woodford Funds (Ireland) ICAV (the “Fund”) has appointed as Swiss Representative Oligo Swiss Fund Services SA, Av. Villamont 17, 1005 Lausanne, Switzerland, Tel: +41 21 311 17 77, email: info@oligofunds.ch. The Fund’s Swiss paying agent is Neue Helvetische Bank AG. All fund documentation including, Prospectus, Key Investor Information Documents, Instrument of Incorporation and financial reports may be obtained free of charge from the Swiss Representative in Lausanne. The place of performance and jurisdiction for all shares distributed in or from Switzerland is at the registered office of the Swiss Representative. Fund prices can be found at www.fundinfo.com.

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