Woodford's original fund has been shunted out of the equity income sector

Neil Woodford's original fund, Woodford Equity Income, has been shunted out of the Investment Association's UK Equity Income sector as it failed to meet the rules on yield.

On average over the last three years, Woodford Equity Income has yielded less by way of return than the UK all-share stock market. This means it is no longer eligible for inclusion in the equity income bracket of funds.

Woodford has been keen to press that this is nothing to do with a change in strategy, and said that the fund has always been focused on "pence per pound" returns rather than yield.

“Neil's focus for the LF Woodford Equity Income Fund (and his previous equity income funds) has been, and always will be, on delivering a particular level of income per share, rather than a specific yield," said a spokesperson for Woodford Investment Management.

"From the outset, Neil said he would aim to deliver 4p based on the launch price of £1 and grow that income each year. That commitment remains."

Laith Khalaf, a senior analyst at investment platform Hargreaves Lansdown, added that the fund may still be a good choice for investors looking to make money over the long term.

"This fund places an emphasis on long term total returns, and so Neil Woodford is willing to give up some income now in return for longer term growth prospects," Khalaf said.

"Though he has had a difficult period of late, Neil Woodford has turned £1 into almost £27 over his entire career, compared with the £12 from the UK stock market, and that long term record shouldn’t be ignored."

However one industry source told City A.M. recently that Woodford may be straying from the areas which have typically seen him excel, becoming more experimental. This could be misleading for retail investors who are backing Woodford on the basis of his stellar investment history.

For example, the fund has a number of holdings in unlisted companies such as litigation funder Burford Capital and challenger bank Atom Bank.

Indeed Khalaf noted that Woodford "currently sees more opportunities in naturally lower-yielding companies than he has historically. This includes investments in innovative, but higher risk, smaller and mid-sized businesses that lead, or have the potential to lead, their market".

Woodford has also been gambling on the durability of UK domestically focused companies throughout the Brexit negotiations, though this has not worked out well of late for companies such as Taylor Wimpey, Prothena and Capita.

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