Late last Friday, the CF Woodford Equity Income fund breached the £10bn mark, just shy of its three-year anniversary.
On the back of Woodford’s solid track record at Invesco Perpetual, spanning 24 years, his flagship fund raised £1.6bn at its launch in June 2014.
Although the star manager’s equity income fund has proved one of the most popular products in the sector and has returned 35% versus the FTSE All Share’s 23% since its launch, he admitted that 2016 “tested his resolve.”
Against, the IA Equity Income sector benchmark, his fund produced returns of just 8.96% compared with average sector returns of 17.16%.
However, year-to-date, Woodford’s equity income vehicle has edged ahead, delivering 6.5% against the sector’s returns of 6.1%.
Head of investment communications at Woodford Investment Management, Mitchell Fraser-Jones, said the flagship fund’s bounce back in February could be a sign that “the shine appears to be coming off the ‘reflation trade’.”
The hype around US and Chinese growth appears to be fading, he argued, giving way “to a more sober assessment of the global economic environment,” which is good for “dependable” equity sectors like healthcare and consumer goods and less so for resources.
AstraZeneca, one of the holdings Woodford blamed for the fund’s poor performance in January, was one of the best performers the following month, alongside fellow healthcare companies GlaxosmithKline and Prothena.
However, Fraser-Jones admitted this likely had more to do with warmer sentiment than fundamental developments.
Conversely, the fund’s zero exposure to the behemoth banks and energy companies like HSBC, Shell and BP helped it over February.
The fund’s Capita holding was also identified as one of the top performers in February, despite Woodford’s concerns about the company’s prospects last year.
While Fraser-Jones said it is “encouraging to have seen a more rational market environment prevailing in recent weeks,” he concluded that it was too early to tell if the reflation trade was truly over.
