5 Funds For Your ISA: Neil Woodford

Published in Company Comment on 13 March 2012

Master investor Neil Woodford boasts a track record that deserves your money.

Each day this week we're highlighting a fund you may wish to consider for your ISA. Today we turn our attention to Neil Woodford, whose dividend-biased portfolios are among the best long-term performers in the market.

Here in the UK, private investors can choose from thousands of investment funds run by hundreds of different fund managers. As a result, finding the right ISA investment can be like plucking a needle from a haystack.

However, if you're hunting for an investment guru with an outstanding track record, then you could do a lot worse than handing over some money to Neil Woodford.

The wizard of investing

Since joining fund manager Perpetual in 1988, Woodford has become one of the best known and most respected money managers in the UK. Today, he looks after more than £20 billion of our money, including the UK's two biggest investment funds.

However, unlike the fast-trading, risk-hungry managers of hedge funds, Woodford's approach to building long-term wealth is remarkably simple. He believes in 'income investing' -- buying shares in quality businesses that pay solid, rising dividends to their shareholders.

This value-based approach helps Woodford to spot and shun investment fads that attract 'hot money' from other managers. By focusing on solid, high-yielding shares, Woodford avoided both the post-1999 dotcom meltdown and the banking crisis of 2007/09.

Where Woodford hunts

When he's confident, Woodford puts large sums -- even billions-- into companies offering market leadership, strong balance sheets and solid, reliable earnings.

Right now he is a big fan of three particular sectors, including pharmaceuticals. The industries he prefers have solid bases of high-spending customers, leading to predictable earnings and dividends. 

For example, Woodford's funds have substantial stakes in healthcare titans GlaxoSmithKline (LSE: GSK) and AstraZeneca (LSE: AZN). Although these companies are two powerhouses of British industry, their shares do look cheap relative to the UK market and provide generous yearly cash payouts to their owners. No wonder Woodford favours them.

How to invest with Woodford

From 2000 to 2008, Woodford's funds beat the wider market (as measured by the FTSE All-Share) for nine years in a row. Also, he beat the market by a wide margin in 2011. In fact, for the 15 years to 2011, Woodford's funds have returned about 340% versus just a 42% return from the FTSE All-Share.

However, you don't need to be rich for Woodford to manage your money, as his two mega-funds -- Invesco Perpetual High Income and Invesco Perpetual Income -- have a £20 minimum monthly contribution and a 1.5% annual charge.

In addition to those two funds, Woodford also runs the Edinburgh Investment Trust (LSE: EDIN). You can buy ordinary shares in this £1 billion trust through a stockbroker in the usual way.

In summary, if you're after a fund manager to provide solid, reliable returns for your ISA, then start with Neil Woodford!

> The Fool's latest report provides an in-depth review of Neil Woodford's market-beating portfolios. Order your copy of 8 Shares Held By Britain's Super-Investor today!

> Cliff own shares in GlaxoSmithKline. The Motley Fool owns shares in AstraZeneca and GlaxoSmithKline.

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Comments

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ConfusedKieran 13 Mar 2012 , 9:44am

I don't understand the basis of the "better than index" performance.
In 2009 I put identical sums into the Invesco Perpetual UK Equity Accumulation fund and a L&G All Share Tracker.

Lucky timing means both have done well
The Invesco fund is up 44%, but the tracker is up 66%

Maybe this is the difference in fees - but on pure cash in my pension the tracker is better

Gareth1989 13 Mar 2012 , 11:49am

Does anyone know the figure off hand for the Edinburgh Investment Trust revenue reserve? I'm considering putting some money into it despite the premium to NAV.

TimBlx 13 Mar 2012 , 11:52am

The price of Edinburgh Investment Trust (EDIN) has barely moved since 2000. Whereas the similar Murray International Trust (MYI) has roughly doubled and is currently yielding 3.7%. EDIN yield in 2001 was 4.2% or 4.6% if you include the 2001 special divi. MYI divi growth is slightly better and the . Both are at about 7% discount to NAV. Based on figures from Digital Look. I should state that I own MYI.

TimBlx 13 Mar 2012 , 11:53am

Sorry, should be 'EDIN yield in 2011'

CunningCliff 13 Mar 2012 , 12:32pm

Hi ConfusedKieran,

The fund you mention, the Invesco Perpetual UK Equity Accumulation fund, isn't one of the two Woodford funds I mention above (Invesco Perpetual High Income and Invesco Perpetual Income).

This would explain the difference in performance between your fund and the wider UK market.

Cliff

westkirby1048 15 Mar 2012 , 9:31am

hi what is the cheapest way to invest in an isa fund with invesco perpetual, high income fund thanks

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