The LF Woodford Equity Income fund has returned -1.1% over three years, underperforming the IA UK Equity Income sector average return by 13.3%.
Those investors who have held their money in his fund since its launch on 19 June 2014 have fared better, seeing returns of 15.67%, but this is still below the sector average of 20.37%.
Woodford’s fund has had a difficult time over the last 12-months as some of his largest listed holdings, like Provident Financial, AstraZeneca and Imperial Brands, have seen their share prices tank and he has lost the backing of significant investors from Jupiter Merlin to Aviva, Architas and LGT Vestra.
During that one-year period, his fund was the worst performer of the IA UK Equity Income sector, returning -13.4% versus the average -0.3%.
Challenging performance
Despite the bombshell that Woodford’s fund has delivered negative returns to investors over three years, Laith Khalaf, senior analyst at Hargreaves Lansdown, said Woodford’s track record should give investors confidence that he will get some of his contrarian investment calls right.
“We all know he has been through a challenging period of performance,” said Khalaf, noting that “the first part of that three years was relatively good”.
“The reality is that all managers can go through these spells, and it’s impossible as a fund investor to insulate yourself from these sorts of periods of underperformance if you’re picking an active manager.”
The important thing to consider is whether Woodford is a skillful manager, said Khalaf, a conclusion which he feels the mega manager’s 30-year track record supports.
“One of the things Woodford has shown in the past is he combines two very important skills: one is stock picking skills, the other is an uncannily astute reading of the macro economic picture. That should give investors some confidence he is in a good position to get these kind of calls right.”
Falling assets
However, year-to-date the star manager’s fund has shrivelled in size to £6.6bn, falling from £8.2bn at the start of the year.
Last week, he was booted from the IA’s UK Equity Income sector for failing to deliver higher income than the FTSE All Share index over a rolling three-year period.
As more of his FTSE investments have lost money, the weighting of his less liquid, unquoted holdings has crept up to 9.69% at the end of January, putting the fund in danger of breaching the Financial Conduct Authority’s 10% limit for Ucits vehicles.
His recent decision to offload his £40m stake in AJ Bell ahead of its IPO and to opt out of the £150m Atom Bank rights issue had investors and City analysts questioning whether his eponymous fund has a liquidity problem.
During this prolonged rough patch, Woodford has continued to defend his contrarian bet on the UK domestic market, arguing that he will be vindicated when the global stock market “bubble” bursts.
Woodford Investment Management declined to comment.
