Charles Stanley Direct has dropped its recommendation of Neil Woodford’s flagship Woodford Equity Income fund from its preferred funds list.
In a release on its website, Charles Stanley Direct’s Rob Morgan said that he still felt that while Woodford, pictured above, is one of the UK’s “most talented and well-known” fund managers, the composition of the Equity Income fund’s portfolio has left the company concerned about performance.
Morgan, pictured below left, said that the company were “increasingly worried” about a relatively small number of existing high growth and earlier-stage businesses in the portfolio.
Woodford Equity Income had been on the preferred funds list since January 2015, just seven months after its roll out in June 2014.
There are now currently 54 funds in Charles Stanley Direct’s the Foundation Fund list with recent additions in the past year have including Fundsmith Equity and Artemis US Extended Alpha.
“We still believe it is a high quality fund and following a tricky period there may be considerable potential in the portfolio as it currently stands,” said Morgan.
“We added Neil Woodford’s LF Woodford Equity Income Fund to the Foundation Fundlist in January 2015 following a promising start from launch in June 2014. We felt it was a strong option in the UK equity income sector: A highly motivated manager with a proven process and strong track record able to manage money in precisely the way he saw fit. However, we have now taken the decision to remove the fund from the Foundation Fundlist.
Morgan added that stock-specific and performance issues “do not necessarily concern us”, pointing that “every fund manager makes mistakes”, is a victim of misfortune and undergoes periods where their investment style is out of step with the market. But as long as their process is sound they should come through that period and recover.
“Woodford’s style of investing has been out of favour before and he has bounced back. He may well do so again. Additionally, falls in value of shares are not always fully justified by fundamentals as the actions of other investors can exacerbate movements,” Morgan added.
Highlighting Woodford’s “admirable record”, Morgan added that he may wish to consider the relative merits of LF Woodford Income Focus as part of this process, as a “more income-orientated fund run by Mr Woodford that excludes smaller and high-growth businesses”.