Neil Woodford’s flagship fund, the Woodford Equity Income Fund, suspended trading yesterday evening after the number of investors cashing out increased.
Link Fund Solutions, the fund’s corporate director, stated it was “in the best interests of all investors in the fund” to suspend all sales, redemptions and other transactions in the fund.
In a statement released yesterday, the company said: “Following an increased level of redemptions, this period of suspension is intended to protect the investors.”
The time will be spent repositioning its unquoted and liquid portfolio into more liquid investments.
The suspension comes after it was revealed the fund had lost £560m in assets over the last month following a prolonged period of underperformance, with its assets more than halving from a peak of £10.2bn two years ago, slipping to £3.8bn last week, according to data from Morningstar.
Commenting on the news, Willis Owen head of personal investing Adrian Lowcock said: “The fund has materially changed over the past few years, in part reflecting Woodford’s view on the value opportunities available in the UK following the Brexit vote, but also as he looked to keep his favoured (unlisted) investments as money flowed out of the fund.
“The result has been an increased exposure to mid, smaller and unlisted companies. As outflows have continued, the problem of holding unlisted stocks in an open-ended vehicle has become more serious, leading to creative methods being applied to meet investors’ demands.”
Formerly one of Woodford’s largest supporters, Hargreaves Lansdown announced it has pulled both its Equity Income fund and Income Focus fund from its Wealth 50 list of favourite funds.
“Investors will understandably be concerned and, unfortunately, while the fund is suspended they will not be able to get their money. The suspension is likely to result in further outflow requests once the fund reopens, putting more pressure on Woodford. But it does give him time to find a solution and restructure the portfolio to be suitable in the current climate. This would likely impact performance of the fund in the short and medium term,” Lowcock added.
Morningstar analysts downgraded the fund to neutral, the second lowest rating, last month after it had received “persistent” redemption requests. Morningstar said Woodford had taken “extreme” action to ensure unquoted exposure was below 10 per cent.
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