Neil Woodford: ‘I'm very sorry for the poor performance’

Funds and Investment Trusts September 7, 2017 by Tom Bailey

Leading fund manager Neil Woodford has issued an apology and explanation for his recent poor performance.

In a video posted on his website Woodford said that the performance of CF Woodford Equity Income has been ‘incredibly painful and [a] difficult thing to have to navigate.’

It has been a year to forget for the feted fund manager – with the fund showing a loss of 0.6 per cent over the period – leaving the fund rooted to the bottom of the Investment Association’s UK Equity Income fund sector. In contrast, the average fund has returned 8.9 per cent over the past year.

‘It's been a difficult period. And I'm very sorry for the poor performance that we've delivered really now since 2016.’

A couple of Woodford’s bets turned sour in recent months, most notably AstraZeneca and Provident Financial.

However, Woodford remains defiant and stands behind his portfolio: ‘There's huge potential in the portfolio, huge undervaluation. And it's a great portfolio, one that I own and want to own,’ he later said.

He noted that while AstraZeneca’s (which accounts for over 8 per cent of Woodford’s CF Woodford Equity Income fund) lung cancer drug trial in July was a significant setback for the company, the announcements came alongside ‘very good results and a number of other very good very positive things. Nevertheless, he adds ‘that was a sort of an event that the market focused on.’

It caused AstraZeneca’s share prices to plummet from 5,113p (26 July), down to 4,325p (27 July), a decline of 15.4 per cent. Share prices have yet to recover, currently sitting at 4,573p.

‘It's the biggest position in the portfolios. And of course, that was quite damaging to the funds in terms of the hits,’ Woodford said.

He also noted the poor performance of Provident Financial, of which Woodford Investment Management owned 19.9 per cent. The doorstep lender saw its share price crash after a number of profit warnings, ultimately leading it to being relegated out of the FTSE 100 and into the FTSE 250.

Woodford, however, said that while stock specific problems have not helped, he argues underperformance is more down to ‘the rather odd characteristics of this bull run in the stock market’.

He adds: ‘It is a very narrowly led market. The stock market seems to want to bid up the prices of stocks that I've talked about before, which provide exposure essentially to Chinese credit growth.

‘In very simple terms, the stock market has decided that Asia, China is good, the UK is bad. It's a very sort of-- it sounds very simple. And maybe it is an oversimplification. But I see- I see that driving- I see that preference playing out in the stock market daily.’

Echoing previous claims, Woodford said that while ‘the short-term performance is painful and is difficult…it isn't a permanent loss of capital. And I can and I believe I will rebuild the performance and rebuild that capital that we've lost recently.’ 

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