Neil Woodford launching new income-focused fund

Star fund manager Neil Woodford has revealed a few more details about a new income fund that he will manage alongside his popular existing funds, which attracted record inflows on launch.

Woodford Investment Management will launch the equity-based Woodford Income Focus on 20 March 2017 with the aim of delivering an income of 5p per share in 2018, equivalent to a yield of 5% in that calendar year on the initial launch price of 100p.

With a smaller group of companies than he manages in the Woodford Equity Income fund, the new fund will carry around 50 stocks.

For Income Focus, the fund manager will able to invest in more overseas companies than the Equity Income fund as time goes on, as it will sit within the 'specialist' fund sector, which allows for more than the 20% maximum permitted for the UK Equity Income sector.

However at launch the fund won’t exceed this proportion.

The company said the launch was in response to "increasing investor demand for high-quality income streams" and that "the CF Woodford Income Focus Fund will have an investment objective for high income generation together with capital growth".

Since launching the original Equity Income Fund, it has is the number one ranked fund in the UK Equity Income sector, having returned 30.6%, compared with the FTSE All Share Index, which has returned 19.9% over the period.

Woodford himself said the level of income that can be generated from an income-focused equity portfolio today is "extremely attractive" in the context of what is available from other asset classes.

Analyst Laith Khalaf at Hargreaves Lansdown said the Income Focus fund will offer plenty of appeal for income-hunting investors as cash and bonds have lost their appeal for this market, while those seeking long-term returns would be more suited to the existing fund.

"Woodford’s performance has been relatively weak in the last year or so, but investors shouldn’t let that deter them; his long term record is peppered with periods of underperformance, yet he has delivered exceptional value for those who are willing to stick with him.

"If a manager takes a truly active approach to their portfolio, particularly in a contrarian fashion, there are inevitably times when the market takes off in a different direction. However, history tells us that in the end the market tends to come around to Neil Woodford’s way of thinking."

Fund related expenses will be absorbed into the fund’s annual management charge, the company said, meaning that the fund’s AMC and ongoing charge will be the same.