Woodford Equity Income has been bumped off FE’s approved list and replaced with the recently launched Woodford Income Focus fund in the latest rebalancing.
Charles Younes, research manager at FE, says the £9.3bn Equity Income fund’s holdings in unquoted companies are at odds with the fund’s income objective.
“We believe the Focus fund to be better for income investors as it does not include a long tail of illiquid unlisted companies which we believe are not consistent with the aims of an income-focused fund,” Younes says.
The £727m Income Focus fund – which launched in March – only invests in quoted assets.
The biggest turnover in the rebalancing was among North American equities mandates, with T. Rowe Price US Equity and Legg Mason Clearbridge US Large Cap Growth replaced by Artemis US Select and Baillie Gifford American.
Younes says: “It is hard to find an active manager able to consistently beat the S&P 500. 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.
“Artemis US Select has been on FE’s watch list for several years. The FE Research team has been eagerly following manager Cormac Weldon’s progress since he left Threadneedle as the fund he managed there was a team favourite. “
In total 13 funds were added to the approved list while seven were ditched.
Rob Gleeson, FE’s head of research, says: “There was significant uncertainty at the time of our March review and unfortunately, the last six months have provided only limited clarity. The UK remains poised on a knife edge, with every bit of good news being offset by a steady trickle of negative data. This is compounded by the uncertain nature of the Brexit negotiations and by the unpredictable trajectory of the Trump White House alongside rising geopolitical tension.
“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. 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.”