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2 income funds that have thrashed Neil Woodford

Source: Woodford Investment Management. Fair use.

Everybody loves star fund manager Neil Woodford, or rather they did. One year of underperformance and the doubters are out in force. CF Woodford Equity Income hasn’t done as badly as people claim, rising 13.1% in the past 12 months, but it still trailed its benchmark equity income index which grew 16.1%, and people don’t expect that. So should you shun the blue-eyed boy of equity income?

Stormy weather

Woodford has been through rough waters before, as you would expect with a manager who is happy to swim against the tide, and has always emerged with his reputation enhanced. I expect him to do it again, but it is always worth checking out the competition. Different fund managers have different styles and invest in different stocks, giving you much-needed diversification. The following two have outpaced Woodford over the last year, although they may not always do so.

Ben Whitmore’s £2.3bn Jupiter Income Trust is a minnow next to Woodford’s £10bn giant. But small is beautiful with the fund returning 23% in the past year, and 75% over five years. It has some crossover with the Woodford vehicle, both feature pharmaceutical stocks AstraZeneca and GlaxoSmithKline, although these two make up a whopping 16.48% of Woodford’s total fund, more than double Jupiter’s 7.7% exposure. Woodford has also gone massive on tobacco stocks, with a 14.21% total weighing in Imperial Brands and British American Tobacco, far greater than Jupiter.

Going global

These are Woodford’s hits. His misses include ignoring oil and commodity stocks, which enjoyed a bumper 2016, and going big on outsourcing company Capita Group, whose share price halved. He also shunned the banks while Whitmore has a 4.8% stake in HSBC Holdings, which leapt 50% in the last year.

Jupiter Income is 100% invested in the UK, Woodford Equity Income is around 14% exposure to other countries, notably the US, with smaller stakes in Norway, Ireland, Luxembourg and Switzerland. Robin Geffen’s Neptune Income has even greater US exposure at 20%, and its top 10 holdings feature no less than five US stocks: Microsoft Corporation, derivatives marketplace CME Group, JP Morgan Chase & Co, Wells Fargo & Co and Johnson Matthey.

Sector splits

Neptune Income therefore gives you greater diversification, with a completely different top 10 to Woodford. It also has has more energy exposure with a 3.34% stake in Royal Dutch Shell, and 3.26% in Rio Tinto. Geffen has returned 20% over the past year, and 55% over five years. 

Drilling down further, Woodford has 36.85% exposure to healthcare and 28.33% in financials, but has next to nothing in technology, consumer services, utilities or telecommunications. Jupiter Income has 25% in financials and 20% in consumer services, but then has a much more even spread of sectors. It is a similar story with Neptune, which has major financials exposure at 34%, followed by a broad spread across the sectors. You can see which man is making the big calls here: Woodford. Next year those calls might pay off.

Three-way bet

Finally, the income. Neptune is the high highest yielding of the three, returning 4.66% a year, beating Jupiter’s 3.5% and Woodford’s 3.17%. So a spread of all three funds may give you better balance than going all-in on Woodford.

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Harvey Jones holds units in CF Woodford Equity Income but has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca, BP, HSBC Holdings, Imperial Brands, Rio Tinto, and Royal Dutch Shell B. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.