New Woodford Income Focus managers Aberdeen Standard Investments (ASI) have given a glimpse of what the revamped portfolio will look like, with only two of the top 10 holdings left over from the Woodford days.

Renamed the ASI Income Focus, the new fund will reopen tomorrow under the management of ASI fund managers Charles Luke and Thomas Moore. Investors are able to place trades from midday today.

In a letter to the fund’s investors about the new portfolio, Luke and Moore said they had ‘prioritised exposure to our highest conviction income ideas, improved the liquidity profile of the underlying holdings, increased the portfolio’s sector diversification and sold down structurally challenged companies.’

It comes as fund administrators Link revealed in a separate letter that the fund’s performance in the period from its suspension on 15 October to 7 February has significantly lagged the FTSE All Share Total Return benchmark, returning 0.77% in that time compared to 4.96% from the index.

Only two of the top 10 holdings, British American Tobacco (BATS) and Babcock (BAB), have survived from the Woodford regime, with new positions including TUI (TUI) and Inchcape (INCH).

The managers said the income ideas generated by the 16 UK equity sector analysts at ASI provided the foundation for the portfolio, which will be a concentrated fund with around 30-40 stocks and have an explicit focus on large-cap and mid-cap companies.

However the top 10 holdings of the new portfolio appear to have more of a mid-cap focus compared with Murray Income (MUT), which is also run by Luke.

The top 10 holdings in that trust include the likes of AstraZeneca (AZN), GlaxoSmithKline (GSK), Diageo (DGE), BHP (BHP) and Unilever (ULVR), none of which are mentioned in the letter about the new ASI Income Focus portfolio.

Commenting on some of the stocks in the portfolio, the managers said they see potential for UK domestic stocks like Close Brothers (CBG), SSE (SSE) and Assura (AGR) – all of which are in the portfolio – to ‘perform strongly following a long period of subdued investor sentiment’.

Alongside domestic holdings, they also see ‘robust dividend prospects’ from internationally-exposed stocks like Coca-Cola Hellenic (CCH), TUI and Ashmore (ASHM), all of which are also included in the new portfolio.


AJ Bell head of active portfolios Ryan Hughes said investors will have a decision to make on whether the new portfolio is appropriate for them, with changes at the sector level including exposure to financials doubling, while consumer goods stocks are now a significant overweight versus the benchmark.

He said it’s therefore important for investors to understand ‘how the new managers think and get a feel for the types of company that they will likely invest in’, to then be able to judge what the likely performance profile of the fund will be.

Hughes added, ‘Those investors who originally invested in the fund for income need to be aware that the fund has changed its income target from ‘5p per share per annum’ to ‘a yield higher than the average yield of the FTSE All Share Index over a rolling 3yr period’.

‘In reality, this means the income paid on the fund is likely to be lower going forwards than before.’


Addressing the poor performance while the fund has been repositioned, Luke and Moore said it was ‘partly the result of the costs incurred via the necessary transition of the portfolio towards a liquid portfolio of strong income-generating UK stocks.’

One example of a holding which proved costly to sell was Honeycomb Investment Trust (HONY), which dragged on performance by 0.64% and proved particularly difficult to offload, eventually being sold at a discount to the prevailing market price.

Another former holding which hurt performance was Card Factory (CARD), which contributed 1.23% to the fund’s underperformance and has since been sold.

Luke and Moore also addressed the impact the coronavirus may have on returns, noting that market concerns around the economic impact of the virus had led to TUI and Inchcape underperforming in January.

But they said they were ‘confident that the operating, and crucially income-generating fundamentals of these businesses are sound and will result in attractive future shareholder returns.’

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Issue Date: 12 Feb 2020