Among the details, we know that it will aim to deliver an income of 5p per share, and is likely to focus solely on UK listed securities, less so small caps with no unquoted stocks.
All intriguing, though the most telling detail is that the fund will not adhere to a 20% limit on overseas holdings, barring it from inclusion in the IA UK Equity Income sector.
Does that mean it will sit within the Global Equity Income sector? And if so, how does Woodford’s expertise in this sector compare with other global managers? Just as importantly, do investors really care about sector classifications?
Scott Spencer, investment manager at BMO Global Asset Management, has seen a trend for more UK equity managers increasing their allocation to overseas holdings and he outlines different reasons as to why this is happening.
He explains: “Sometimes it is because of limited opportunities in the UK market, for example in technology names. Other times it could be because there are similar stocks overseas which are priced cheaper – for example if BP is on a big premium to Exxon in the oil space, or owning Pfizer or Roche instead of Glaxo in pharma.”
He adds: “More managers now push that 20% limit because of the lack of attractive income opportunities in the UK. Or, if you want to take the positive aspect of it, there are growing income opportunities overseas, particularly in Asia and Japan.
“That’s the carrot, but the stick is that a lot of the natural players in the UK income market would fall into the steady-eddie, quality, defensive, highly valued bucket; the bond proxy names like Unilever, which all look quite richly valued.”
