Neil Woodford drops fintech and Alternative Credit in new income fund

By Daniel Lanyon on Thursday 18 May 2017

Alternative LendingDigital BankingSavings and Investment

The fund manager has launched a new portfolio aimed at higher income investors but has eschewed alternative income kickers, in favour of REITS.

The fund manager has launched a new portfolio aimed at higher income investors but has eschewed alternative income kickers in favour of REITS and banks.

Neil Woodford has unveiled the full portfolio holdings for his latest fund the CF Woodford Income Focus fund, following its launch in March.

While the fund has some overlap with the £10bn CF Woodford Equity Income fund, launched three years ago, there are some notable differences beyond the punchier more concentrated number of holdings - which total 50 names compared to 131.

One of the more notable differences is Woodford’s avoidance of disruptive finance. In his first fund the manager holds several hundred million pounds worth of fintech and Alternative Credit positions.

Woodford has been a bull when it comes to this sector and in contrast had also previously talked down the prospects for banks – in terms of their equity performance prospects. Last week, however, the fund manager announced he had bought up a substantial holding in Lloyds bank that eclipsed his fintech holdings by tens of millions of pounds.

His first, and much larger portfolio, include large stakes in closed-ended funds investing in the space such as P2P Global Investments, VPC Speciality Lending and HoneyComb which have suffered from a variety of problems in recent years that have pushed them onto wide discounts, although these have somewhat narrowed in recent months as the outlook has improved.

Woodford also has potential future income sources in his larger fund from an unquoted stake in P2P lender Ratesetter. While the firm may not be paying huge dividends at its current stage of development, Woodford clearly sees the firm as a future dividend play.

In the Income Focus fund, however, any obvious fintech or alternative credit plays are absent although the manager has bought several Real Estate Investment Trusts such as New River, Raven Russia, Sirus Real Estate, British Land, Londonmetric Property, Hansteen.

REITs are generally trading on discounts too, but Woodford clearly believes these will be a play on the UK economy, which the manager has made bullish noises on in recent weeks. 

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