Can Woodford's magic still work?
Oct 10, 2008
"Is it a bird? Is it a plane? No, it's Invesco's Mr Woodford," shouts a headline in The Observer. Neil Woodford, one of Britain's most successful fund managers, has flown to the rescue of the struggling Edinburgh Investment Trust (LON:EDIN). Down 20.8% this year and up just 7.9% over three, Citywire AAA-rated Woodford took over management of the 115-year-old trust last month, in an effort to rescue it from the doldrums.
So should you buy into it? Woodford is one of the UK's top investors – his existing funds at Invesco may be down more than 17% this year, but that compares to a 23% fall in the FTSE All-Share. And in the past five years his Invesco Perpetual Income fund has returned 77.8%, compared to 30.2% for the benchmark. Also, the fund trades on an 11% discount, so there's a good chance that as investors are drawn by the 'Woodford magic', the spread will close – possibly meaning a quick profit for quick-off-the-mark investors. But the problem isn't so much Woodford as the fact that the fund focuses mainly on large UK stocks. As the performance of his other funds shows, a good manager may lose less money than the rest in a falling market, but he'll still lose.
Also, to secure Woodford's services, the trust has introduced performance fees. That could raise the total expense ratio on the fund from a low of 0.4% to 0.6%, says Ifaonline.co.uk. That's low when compared with an average 1% fee for the sector. But it's still another reason to steer clear for now.
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Edinburgh Investment Trust top ten holdings
| Name of holding |
% of assets |
| BP |
8.50 |
| Royal Dutch Shell |
7.90 |
| HSBC Holdings |
6.00 |
| Vodafone Group |
5.80 |
| AstraZeneca |
3.70 |
| Imperial Tobacco Group |
3.50 |
| National Grid |
3.40 |
| British American Tobacco |
3.30 |
| Anglo American |
3.00 |
| BG Group |
2.80 |
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