The analytics firm said a number of holdings in illiquid and unlisted companies meant the £9.2bn Woodford Equity Income Fund was “not consistent with the aims of an income-focused fund”.
It was replaced with his Income Focus fund which was launched in March this year.
The shift came as FE said the UK was on a “knife edge”, and explained it had filled its new approved list with funds that preserved investors’ capital and offered portfolio diversification.
Poor stock-picking saw Newton Global Opportunities Fund kicked off the list, and Aviva’s Strategic Bond Fund lost its place over concerns team changes meant the manager had less freedom to implement his strategy.
Rob Gleeson, FE’s head of research, said the significant uncertainty present during the March rebalance had not abated “with every bit of good news offset by a steady trickle of negative data”.
“It is difficult to make market predictions at the best of times, and in these conditions covering all bases is the wisest move. Diversification remains an investor’s best defence,” he said.
“The latest changes to our approved list reflect the funds we believe are best at their respective strategies within each asset class - strategies being selected for their suitability in a wide range of scenarios, not just their short-term success.”
In total, 13 funds joined the list and seven left in the second rebalance of 2017.
North American Equities saw the biggest turnover with T Rowe Price US Equity and Legg Mason Clearbridge US Large Cap Growth replaced by Artemis US Select and Baillie Gifford American.
“It is hard to find an active manager able to consistently beat the S&P 500,” FE research manager Charles Younes said. “The Legg Mason fund has been very benchmark aware and therefore offers little more than a passive fund.
“Baillie Gifford American on the other hand is different to most US equity managers with its clear bias towards technology names.”
Among the funds added to the approved list were James Clunie’s Jupiter Absolute Return fund due to its adding value in short selling, and the Allianz Strategic Bond fund for its diversification benefits.
Goldman Sachs’ Global Core Equity Portfolio secured an FE spot for its use of artificial intelligence to identify quality, well-run companies at attractive valuations.