Woodford Investment Management, headed up by Neil Woodford, confirmed the fund will shortly switch to the IA UK All Companies sector.

The fund fell foul of rules dictating that they must deliver an income higher than the FTSE All Share index over three rolling periods.

Analysis by Hargreaves Lansdown’s Laith Khalaf pointed to Neil Woodford’s investment strategy and sector rules on yield, as reasons for the removal of the fund from the Equity Income sector.

He said Mr Woodford currently saw “more opportunities in naturally lower-yielding companies than he has historically.”

To demonstrate his point, he cited investments in “innovative, but higher risk, smaller and mid-sized businesses that lead, or have the potential to lead, their market.”

These included healthcare companies working on ground-breaking therapies and treatments, as well as consumer and financial businesses using technology to pioneer new services.

These were considered to be potential long-term drivers of growth, but within the confines of the three rolling periods rule, would impact the performance of the portfolio as a whole.

Senior analyst Mr Khalaf said: “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.

“Consequently, over the last few years the fund has yielded on average a little less than the UK stock market, which means it’s no longer eligible for inclusion in the UK Equity Income sector.
 
“Fund sectors should only be seen as a rough guide to what a fund does and are no shortcut for looking under the bonnet to get an idea of how the manager goes about his business.

“Importantly the change of sector has no bearing on how Neil Woodford runs the portfolio.”
 
“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.”

He added: “We think the Woodford Equity Income fund can work well alongside other equity income funds as part of a diversified income portfolio, as well as being considered by those who seek to maximise total returns over the long run.

“The Woodford Income Focus fund was launched last year for those investors who place more emphasis on income upfront.”