After months of poor performance, and the latest controversial swap deal, many IFAs have been losing faith in Neil Woodford.
As New Model Adviser® sister title Funds Insider revealed on Friday, Woodford’s fund sales are now hugely dependent on the marketing might of Hargreaves Lansdown with around a third of inflows coming through the direct-to-consumer platform.
Last week New Model Adviser® also reported some IFAs have moved clients away from Woodford in recent months.
However, some IFAs out there are sticking by Woodford, including Scott Gallacher (pictured below), director of Rowley Turton Private Wealth Management.
Gallacher does have clients invested in Woodford and he said, while recent performance has been ‘disappointing’, he is using his funds as a ‘Brexit hedge’ in case there is a good deal.
‘Woodford believes the current low valuations of his share holdings are so low as to fundamentally undervalue these companies,’ Gallacher said. ‘He argues a good Brexit deal (which he believes will happen) will lead to large recovery in the share prices, and even a bad Brexit outcome won’t be too bad for his funds as the share prices are already pricing it in.’
Gallacher said because many of Woodford’s holdings are small-cap UK domestic stocks, not dependent on overseas sales, a Brexit deal would see the pound lift and thus hit companies with international operations.
‘I do have some concerns that, despite being historically a great fund manager, Woodford may have got himself into somewhat of a hole. Perhaps the only way out of that hole is a good Brexit deal.'
Gallacher said his main worry was Woodford coud have lost objectivity over the likelihood of a deal being struck in the Brexit negotitions. ‘However, as part of a larger balanced portfolio, the Woodford fund is arguably a good hedge against a good Brexit deal. A good deal is likely to see the pound recover and the value of the international holdings in a well-diversified portfolio fall.
'Consequently having the potential rebound in the Woodford funds would be good in that scenario. And, in a bad Brexit scenario, a falling pound would benefit the international holdings.’