Woodford to launch higher income fund paying 5pc
Feted stock picker Neil Woodford will launch a fund targeting 5pc income at its outset – a higher level than his existing fund. Woodford Investment Management, his eponymous firm, will launch the Income Focus fund onMarch 20, reportedly, in order to capture investors’ Isa contributions around the beginning of the new tax year on April 6.
The fund will initially pay 5p of income per £1 invested, while the current £9.6bn Woodford Equity Income fund initially targeted 4p for every £1 invested.
After the first year the new fund will aim to deliver 20pc more than the yield of the FTSE All Share index, the benchmark for British companies.
The fund launch comes ahead of the deadline for Isa subscriptions at tax year end, when many investors rush to fill the current £15,240 limit for tax-free investing. The limit rises to £20,000 for 2017-18.
The new fund, like the existing one, will invest mainly in UK stocks and can invest up to 20pc in overseas companies. The fund will invest only in listed companies.
A high income variant of the existing fund would mirror the position at Mr Woodford’s former employer, Invesco Perpetual, where he ran both the Income and High Income funds.
Mark Dampier of Hargreaves Lansdown, the fund shop, said: “From a launch price of 100p, Woodford is aiming to provide a pretty punchy 5p income in 2018.
“This will limit the opportunity for growth. So, for me, this fund will be very much for those seeking and prioritising income over growth. This contrasts with Woodford Equity Income, which is more growth-orientated.”
The Woodford Equity Income fund underperformed in 2016, returning 3.2pc against 16.8pc for the FTSE All Share index. Since launch in June 2014 the fund has returned 28.2pc, compared with the FTSE All Share’s 16.6pc.