In the recent meeting of the Buckingham Gate Investment Committee, we deliberated long and hard about adding the Woodford Equity Income fund to the Buckingham Gate Portfolios.
While Neil Woodford’s experience and performance in this sector is almost undeniable, the reason we had pause for thought is that the track record of the fund is only 18 months. We usually like a fund to have a 3 year track record before we would consider adding it to the portfolios.
In this case however, we have made an exception to this rule for what we feel are a number of very good reasons:
- The performance of the fund during it’s 18 month history is outstanding by almost every measure. We have considered no less than 12 different fund performance metrics and the Woodford fund tops the tables in all of them. The case for including the fund was compelling based on these factors alone.
- While Woodford Investment Management is a new venture, Neil Woodford has been managing a UK Equity Income fund with a very similar mandate for more than 20 years at Invesco Perpetual with similar success. If we combine Neil Woodford’s track record across the two funds, it makes for some very impressive viewing.
- Given the ‘brand name’ of Neil Woodford, he has been very successful in gathering new monies to invest in his fund, with the Woodford Equity Income Fund having over £8bn of funds under management at the time of writing. As such, the fund does not have the same characteristics as many other ‘start up’ funds. In fact, the fund is considerably larger than many other more established players.
With all of the above taken into account, we have decided to include the fund within our portfolios.
When we combine Neil Woodford’s experience in the UK Equity Income space, with that of Nick Train (Lindsell Train UK Equity Fund) in the UK Equity growth sector, we are left with a duo of the most experienced and successful managers in the UK equity sector.
It is important to remember that past performance is no guide to the future, however we do feel that there is significant value to be added by experienced managers in the UK equity space. This is in an unusual contrast with the US equity sector, where there are very few, if any, ‘active’ managers who consistently add value.
For this reason we continue to adopt our hybrid approach to fund selection, choosing more expensive active managers where we feel they can add value, and using low cost ‘tracker’ funds where they may not.