In the two years since it was established, the firm and its namesake, Neil Woodford, have proven themselves exceptionally astute readers of the UK investment market’s appetites. The Woodford Patient Capital Trust set a record for capital raised in the investment trust market, while the firm’s flagship equity fund continues to gather assets rapidly.
On hearing that the firm was mulling a high income fund, however, my first thought was: is it not a tough environment in which to launch a high income?
Not from an asset gathering point of view mind you; in the current yield-hungry world a product from the WIM umbrella offering ‘high income’ will almost certainly be welcomed with open arms by the investment community, but rather in terms of finding sufficient, suitable investments.
After all, much of the news flow in recent weeks has centred on funds leaving the UK Equity Income Sector because the yield demands were becoming too onerous in the current low-yield world. Indeed, a theme throughout markets in recent years has been the stretch for yield and its resultant impact on the valuation of stocks – particularly those offering a good quality, visible earnings profile and low volatility. A trend exacerbated by the fact that the dividends of many of traditionally high dividend payers have come under threat.
Granted, the fund's proposed starting yield is 4.2-4.5% which is not too onerous, but it is worth noting that the firm was clear to indicate the new fund would have the flexibility to invest at least a portion of its assets overseas.
It said: “Although the higher yield would be achieved by investing primarily in UK-listed companies, we envisage that the fund would have no geographic constraints, giving Neil Woodford and his team the flexibility to invest to invest anywhere in the world where they identify a suitable investment opportunity.”