Star equity manager Neil Woodford said large-cap tobacco and pharmaceutical holdings were hit hardest as his equity income portfolio declined 0.7% during last month's global volatility.
In his August roundup for the £7bn Woodford Equity Income fund, the veteran manager (pictured) said British American Tobacco, Imperial Tobacco, AstraZeneca, and GlaxoSmithKline suffered from a "panic-driven sell off" following the devaluation of the renminbi, and the biggest one-day fall in the Chinese stock market for eight years.
However, he continued to add to each of these holdings, and several others, during the market turmoil as he saw no fundamental justification for the share price declines.
"Given our concerns about productivity, deflation, debt and the overall global growth outlook, we have built the portfolio on the expectation that it will receive little help from macroeconomic trends," he said.
"In general, this strategy and our overall investment approach served the fund relatively well through the volatile conditions, although the portfolio was unable to avoid a decline in absolute terms."
The fund was down 0.7% in August while the IA UK Equity Income sector dropped 3.8%, according to FE.
How Woodford responded to China equity rout
The most positive contribution to the portfolio came from medical technology company Stratified Medical, an unquoted holding in the fund which was subject to an independent revaluation.
Woodford said confidence has grown in the company since it identified and out-licenced two new potential targets for Alzheimer's disease and demonstrated its ability to identify other new prospective therapies.
"The company has recently announced a further funding round which we participated in and the value of the existing stake has been independently uplifted to the new valuation," he said.
"We continue to see considerable long-term growth potential in the business as it continues to develop and commercialise its very impressive intellectual property based around a unique partnership of artificial intelligence and healthcare innovation."
Woodford also introduced two new US health care positions to the portfolio in August amid the global volatility.
AbbVie trades one of the most attractive valuations and growth rates in its sector for the biggest selling drug in the world, Humira.
The drug is used to treat rheumatoid arthritis, Crohn's disease, and ulcerative colitis, and is soon due to come of patent.
"Humira is the biggest selling drug in the world and continues to grow quickly but is due to come off patent soon," said Woodford.
"The valuation discounts an immediate threat to the franchise once the patent estate starts to expire, but we believe that this significantly underestimates the extent to which AbbVie can protect the Humira franchise through further innovation."
Swiss business Cequr also joined the portfolio as an unquoted position after it developed a three day patch-like insulin delivery device for people with type two diabetes.
In the July update for his equity income fund, Woodford said economic data coming out of the US and UK is not strong enough to justify a rate rise.
As a result, he said he was increasingly worried about the possibility of a policy mistake if central banks decide to raise interest rates too soon.
