Despite originally having a target of £250 million, Terry Smith ended up raising £823 million for his new Smithson fund. With this huge chunk of cash smashing through Neil Woodford's previous record of £800 million in 2015, now seems like a good time to ask:
Are there better times ahead for Neil Woodford?
Almost twelve months ago, our friendly fund expert Mark Dampier of Hargreaves Lansdown said investors should sit tight in Neil Woodford funds after a run of poor performance.
Is he sticking to this view?
Mark says: "It has been a tough time for Neil Woodford. He has suffered significant redemptions, his style remains out of favour and the UK is one of the most hated markets. I’ve never seen it so unpopular. It would be great if Neil could be left to get on with things, but he has a high profile and will remain in the spotlight.
I would say a few things: the first is that investors shouldn’t be looking at someone when they’ve had a very strong run of performance, but when they’ve had a weaker run. Neil has a 30-year track record. He has had difficult periods before and recovered. He has made mistakes, but his style of ‘value’ investing has been very out of favour.
Also, Neil has two macroeconomic premises driving his stock selection. The first is that there will be a deal on Brexit. The second is that there won’t be a Labour government. His fund is geared to unloved domestic companies, which are very cheap. If someone doesn’t agree, they probably shouldn’t buy his fund - but they probably shouldn’t buy the UK market.
It is also worth adding that investors shouldn’t just be holding Neil’s fund, but a range of different funds. Is it worth holding his fund alongside those of say, Clive Beagles at JO Hambro? These two funds don’t have much cross-over of holdings and tend to perform differently. Clive has been growing the dividend on his fund by around 10% per year. If investors want a more ‘middle’ option, the Artemis Income fund might be a good choice.
If every fund you hold is firing on all cylinders, it could be a reason to worry. It means they are all pointing in the same direction, which may hurt if the market turns.
Investors need to be patient if they are buying an active manager such as Neil. If they can’t take the pressure, perhaps a passive fund might be a better option."
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