'Woodford Effect' helps to drive equity income fund sales

(Adds analyst comment, detail)

By Yousra Elbagir

LONDON, July 29 (Reuters) - Funds which invest in companies for their dividend payouts took in a record amount of investor cash in June, partly due to the launch of a fund from British star fund manager, Neil Woodford.

UK equity income funds accounted for 1.4 billion pounds of the 2.1 billion pounds net retail sales in June, data from the Investment Management Association showed.

The CF Woodford Equity Income fund, which launched in June, had assets of 1.7 billion pounds as at June 30, according to the Woodford Funds website. Woodford Investment Management was not immediately available to comment.

"Investor (Other OTC: IVSBF - news) interest in Woodford Equity Income fund has caused a spike in UK Equity Income fund sales," Laith Khalaf, senior analyst at Hargreaves Lansdown (LSE: HL.L - news) , said in a research note on the IMA data. "The "Woodford Effect" is a clear example of investors backing a fund manager rather than a particular asset class, or market."

Woodford built a strong following during his 25 year tenure as fund manager at Invesco Perpetual. Woodford left Invesco Perpetual in April to start his own firm.

Low interest rates and a drop in government bond yields since the financial crisis have increased demand for investments such as equity income funds which provide an income stream from company dividend payments. (Reporting By Yousra Elbagir; editing by Simon Jessop and Jane Merriman)