Fund roundup, September 2015

Important Information

We want to make investing with us simple and straightforward for all of our clients.

Please select your investor type from the options below.

Alternatively you can register or log in to an existing account.

Please note that by making your selection here you are agreeing to the Woodford Investment Management Ltd Privacy Statement and to our Terms and Conditions.

Mitchell Fraser-Jones 13 October 2015 Est. reading: 5 min read

September was another weak and volatile month, with equity markets continuing to reassess poorer economic fundamentals, as evidenced by a succession of disappointing macro data releases around the world and the Federal Reserve citing “developments abroad” as a reason for deciding to leave interest rates unchanged.

This reassessment has brought markets closer to our own cautious view of the world but it has not necessitated any change to our strategy. We continue to be concerned about productivity, deflation, debt and the overall global growth outlook, and remain focused on maintaining a portfolio that can prove resilient to these long term structural headwinds.

The portfolio slightly outperformed the FTSE All Share index which declined 2.7% during the month, but could not avoid a negative return.

The biggest detractor over the month was our position in Allied Minds. The stock’s sharp underperformance was due in large part to an opportunistic attack from a short-seller using a piece of self-generated research, which the FT described as ‘strangely shallow’. Although this has been unsettling for market sentiment in recent days, we see nothing fundamental to concern us. Indeed, our confidence has increased in both the long-term potential of its existing portfolio of maturing technology businesses and in the management team’s ability to identify new value-creating opportunities from its relationships with the best research institutions in the US.

Other major holdings that underperformed during September included GlaxoSmithKline, Legal & General and Rolls-Royce. As is often the case over shorter time periods, fundamentals have played no part in these moves. When this happens, the logical thing to do is to buy more, which is exactly what we have done.

Prothena was also a significant underperformer in September, as it was caught up in a widespread sell-off in US biotech shares. Given the way that the sector has traded this year, the sell-off is perhaps unsurprising, but we were disappointed that Prothena became so embroiled in it, as its valuation is very far from the bubble levels that some of its peers had reached. Again, we have seen no fundamental developments to disturb our confidence in the long-term investment case and, as above, we added to the position.

More positively, our tobacco holdings performed extremely well. In uncertain times, the defensiveness and the dependability of these businesses has come to the fore. Furthermore, there was some very positive news from the sector: Reynolds American is selling the international rights to its Natural American Spirit brand to Japan Tobacco for $5bn. As the company has almost no exposure outside the US, this is a very attractive price. Imperial Tobacco and British American Tobacco also performed well.

Another strong performer was Amlin, after the non-life insurer agreed to be acquired by Mitsui Sumitomo Insurance. We sold our holding after the shares soared on the news. We have been keen on the Lloyds vehicles for a considerable time and Amlin has performed well in recent years. There are still a number of very attractively-valued companies in this sector, such as Lancashire, Hiscox and Beazley, all of which benefited in September from speculation that they might become future bid targets. Each of these companies has demonstrated strong underwriting skills and capital discipline in recent years, and we remain positive on the sector.

Other portfolio activity included further additions to our position in US pharmaceuticals company AbbVie. Share price weakness has continued, giving us the opportunity to increase our position significantly at what we consider to be a very attractive valuation. We are increasingly confident that its Humira franchise (a treatment for auto-immune conditions such as rheumatoid arthritis) can be much better protected from competition than the valuation currently implies. Meanwhile, AbbVie’s pipeline appears to be developing well with, for example, a treatment for uterine fibroids progressing into phase III trials. Also within the health care sector, we added meaningfully to our Roche holding at attractive valuation levels.

Elsewhere, we took advantage of share price weakness to add to a wide range of holdings, most prominently in AA, Essentra and G4S. Incidentally, we have had management meetings with each of these businesses in recent weeks.

As well as our disposal of Amlin noted above, we sold the remainder of our holding in Centrica, which has become the latest victim of the intense fight for capital between existing positions and new ideas. Following Centrica’s disappointing dividend cut earlier this year, we initially added to the position but have subsequently become more concerned about its exposure to the oil price and increasing competition and regulation in downstream energy markets, both here in the UK and in the US. We think the company will now struggle to deliver growth much above low-to-mid single digits, which combined with a reduced cash return, leads to a modest total return expectation. At the prevailing valuation, therefore, the shares can no longer justify their position in the portfolio.

To conclude, it feels appropriate to draw attention to the large grey mammal with the trunk, sitting in the corner of the room. Since month end, equity markets have experienced a profound change of leadership. The sell-off in US biotech has intensified and at the same time, commodity-related stocks have enjoyed a rapid and significant bounce. Ironically, it seems that the Fed’s decision not to raise interest rates and a very weak set of US payroll numbers, has triggered a dramatic rotation into cyclical assets. We’ll just have to wait and see how long it lasts, but it’s a timely reminder that markets do not necessarily act rationally all the time – at least not in the short term.

As long-term investors, we sometimes have to tolerate short-term under-performance in the pursuit of our longer-term goals. This can be uncomfortable but, fundamentally, we remain convinced that our investment strategy is highly appropriate for the current challenging economic environment. There will be more on current market conditions in a blog article in the next few days. Subscribe to receive alerts if you haven’t alreadyRegister to receive alerts if you haven’t already.

LF Woodford Equity Income Fund
Download as a PDF

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 ongoing charges figure 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 – some of these security types could increase the fund′s volatility and increase the level of indirect charges to which the fund is exposed
  • The fund may invest in overseas securities and be exposed to currencies other than pound sterling – as a result, exchange rate movements may cause the sterling value of investments to decrease or increase
  • The fund may invest in unquoted securities, which may be less liquid and more difficult to value, because they are generally not publicly traded – the lack of an open market may also make it more difficult to establish fair value

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.

The Woodford Funds (Ireland) ICAV (the “Fund”) has appointed as Swiss Representative Oligo Swiss Fund Services SA, Av. Villamont 17, 1005 Lausanne, Switzerland. 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

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 Beaufort House, 51 New North Road, Exeter, EX4 4EP.

© 2019 Woodford Investment Management Ltd.
All rights reserved.

Are you sure?

By disagreeing you will no longer have access to our site and will be logged out.

Privacy Preference Center

Experience Tracking

Lets our analytics service track you across our different websites and enables data sharing among our different marketing tools.

AMCV_[Tracker ID]@AdobeOrg (Adobe), [Tracker ID]@AdobeOrg (Adobe)
Adobe Analytics (helps us provide you with more relevant experiences and content based on your likely interests). Cookies: demdex, dextp, dpm, DST, DSTJS
Twitter personalisation (by better understanding how devices are related, Twitter can use information from one device to help personalize the Twitter experience on another device). Cookies: personalization_id
Heap Analytics (provides metrics on user behaviour and actions throughout the site). Cookies: _gid, _hp2_id.[Tracker ID],_hp2_props.[Tracker ID], _ga, _mkto_trk, optimizelyBuckets, optimizelyEndUserId, optimizelySegments, raygun4js-userid, _attribution_referrer, _csrf
Adobe Analytics (provides you with more relevant experiences and marketing messages based on your likely interests). Cookies: _tmae ,ev_sync_dd,ev_sync_yh,everest_g_v2,gglck

Traffic Metrics

Allows Woodford to aggregate information on website usage and popular content

_ga, _gid
Google Analytics (tracks and reports website traffic and user behaviour): Cookie: CONSENT
New Relic (application and server performance monitoring – allows us to spot problems with our website code and improve them to keep things running smoothly). Cookie: JSESSIONID
Adobe Analytics (provides you with more relevant experiences and marketing messages based on your likely interests). Cookies: __qca,__smToken, _ga, _mkto_trk, _rtbmedia

Search History

Populates the 'recent searches' section of the website navigation.


Close your account?

Your account will be closed and all data will be permanently deleted and cannot be recovered. Are you sure?