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Barnett has no plan to follow Woodford into Lloyds

Barnett has no plan to follow Woodford into Lloyds

Mark Barnett has no intention to buy Lloyds as he maintains his bearish stance towards banks. 

His view conflicts with rival top equity income fund manager, Citywire A-rated Neil Woodford, who revealed he had bought a position in Lloyds for his flagship Income fund last month.

The move was a reflection of Woodford's growing confidence in the long-term outlook for the UK economy, partly due to Prime Minister Theresa May's decision to call a snap election next month, which is expected to deliver a bigger Tory majority.

Citywire+ rated Barnett (pictured), who replaced Woodford as head of Invesco Perpetual's giant equity income franchise in 2014, is not so convinced though, retaining his view mainstream banks are not the best place to benefit from a normalisation of interest rates.

Although the government has successfully returned Lloyds to the private sector, Barnett still believes the overall regulatory outlook for banks remains challenging. He sees an additional headwind on their ability to pay and grow dividends.

Instead Barnett sees more opportunity in life insurance groups, believing profits within his long standing investments in Lloyds underwriting companies will benefit from higher rates. He also has high hopes for his unquoted investment in savings platform AJ Bell.

‘At present, there are specific financial sub-sectors such as banks and insurance, whose profitability is seen as a potential beneficiary of rising interest rates and bond yields,' Barnett told Wealth Manager

‘I see more opportunity in life insurance groups where there is strong demand momentum for savings and protection products from an aging population, as well as good barriers to entry.’

Barnett also continues to find ‘attractive investments’ in the financial sector, a ‘broad category’ which he believes is ‘one of the most interesting and varied’ sectors of the equity market at present.

He said he likes innovative lending companies including Provident Financial, Secure Trust Bank as well as variety of new lending trusts, all of which feature in his portfolios.

His other financial holdings include BCA Marketplace, Redde, Burford Capital and London Stock Exchange.

In the three years to the end of March, Barnett has returned 23.2% in the equity income sector versus a peer group average of 24.1%.  

 

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Neil Woodford
Neil Woodford
88/88 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: -4.35%
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85/88 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 0.99%
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