“Revealed: the real risk of Woodford”. If Neil Woodford was sitting down yesterday morning with his Sunday morning cup of coffee, he’d have needed a fairly strong caffeine fix to prepare him for the reading the content of the lead article in the Sunday Times Money section. The same would apply to any of your clients who hold the fund.
Not that it would have come as a surprise to Woodford. The ST reports how it contacted him on Thursday to outline the story they intended to run, which focused on the risks that some experts believe that he is now taking. The full page article goes into detail about the stock selection and asset allocation of Woodford Equity Income fund and how it has changed since launch in 2014. In a nutshell, the article reports on how the exposure to large ablue-chips and medium-sized, dividend paying companies has shrunk whilst investment in what the article calls “volatile smaller companies” has increased to almost a fifth of the fund, including biotech start-ups for which Woodford himself is so passionate. You’ll probably be all too aware that recent performance has not exactly been good, but the article’s approach to highlighting the increased risks to investors through the tilt in asset allocation fuelled by increased redemptions, isn’t going to make for comfortable reading for investors.
On a more positive note, Ian Cowie has China in his investment sights this weekend. Writing his usual Personal Account column in the Sunday Times Money section, he reminds readers of the value of investing internationally and how China’s growing economy has significant potential despite worries over a trade war. As recent events seem to have increased hopes that such a trade war between the US and China can be averted, Chinese stocks have rallied. Indeed, they’ve had an excellent start to the year. Cowie talks about his approach to gaining exposure to the sector through the Fidelity China Special Situations IT which, he reminds us, currently trades at a double digit discount to NAV. He concludes by saying that “no matter what happens with Brexit, the sun will continue to rise in the east, and so will some economic opportunities”. Here in the latest edition of IFA Magazine, our own Mike Wilson has similarly been looking at what’s going on in China. You can read his article HERE
“The reason we’re all paying too much inheritance tax and how to avoid it”. That’s the eye-catching title of Harry Brennan’s lead story in the Sunday Telegraph Money section. So what’s it about? The article proceeds to explain the benefits of having a whole-of-life insurance policy in place to make things easier for the executors to settle IHT bills quickly and easily. It’s aimed at DIY investors of course, exploring the changing demographic and economic situation whereby more older people tend to have benefitted from the growth in the value of residential property and similarly the trend towards releasing such equity from property later in life.
The details and implications of having an insurance policy in place will come as absolutely no surprise to professional advisers who will probably have been considering such a strategy for appropriate client situations for decades. However, the article quotes statistics from the ONS to show that from 2008 to 2016, the number of estates covered by insurance policies declined by more than 20pc.
Insurance isn’t a topic that we see grabbing the headlines in the personal finance sections very often. To our mind, this is unfortunate as the value of having effective protection policies in place to cover unforeseen circumstances as well as at the end of life, cannot be overstated.
Meanwhile, over at the Financial Mail on Sunday, Jeff Prestridge is looking at the ten shares which have delivered the best returns since the financial crisis back in 2008. It’s based on research done by Hargreaves Lansdown and the list includes names such as Legal and General, Right Move and Barratt Developments. This topic is unlikely to be of huge interest to financial planners, but if you want to find out more, then you know where to go to read the article.
On a slightly different tack, the fund in focus at the MoS this weekend is Jupiter Asian Income fund, which has just reached its three year anniversary. As Jeff Prestridge reports, performance of the fund to date has been pretty good, with overall returns touching 45% over the three year term. Manager Jason Pidcock is currently favouring investment in more establishing Asian countries such as Australia, and sees value in sectors such as gaming. As the article quotes him as saying “I like companies that have strong balance sheets, are willing to pay regular dividends, and have realistic growth ambitions.’ The article reports that all bar two of the holdings have dividend yields in excess of three per cent, resulting in an overall yield for the fund of four per cent.