Following the news that the Investment Association (IA) have removed the LF Woodford Equity Income fund from the UK Equity Income sector and placed it into the IA UK All Companies sector, Square Mile’s view of the fund has not changed and it retains its AAA rating.  

In order to remain within the UK Equity Income sector, funds must deliver an average yield in excess of the FTSE All Share index over rolling three-year periods. Mr Woodford’s strategy has fallen short of this measure, having produced an average yield of 3.5% over the period, this compares to 3.6% for the index.

At Square Mile, we believe it is more important to assess funds against their stated objectives. In this instance, Mr Woodford attempts to deliver high single digit absolute total returns (i.e. the combination of income and capital growth) per annum over the long term and whilst we are clearly aware of the fund’s performance difficulties over the past year or so, we would highlight that the fund has grown its annual distributions in each year since its inception in June 2014.