Dealing in Neil Woodford’s Equity Income fund has been suspended “with immediate effect and until further notice”. The decision was taken to “protect the investors in the fund” following “an increased level of redemptions” (people trying to sell their holdings), according to Woodford Investment Management.
The suspension is designed to give Woodford time to “reposition” the unquoted and less liquid stocks (ie those which are harder to sell at short notice in order to meet investor redemptions) to more liquid investments. The firm promises to keep all investors “appropriately informed” about the suspension, including how long they think it will last.
The news of the suspension comes shortly after Kent County Council confirmed that it was pulling the £250m it had invested in the fund, which is one of the largest investments.
Woodford’s flagship equity income fund has had a torrid few years, in which it has rarely been out of the news, due to one struggling holding or another, such as online estate agent Purple Bricks, or doorstep lender Provident Financial.
Assets in the fund currently stand at £3.71bn, nearly two-thirds down from their peak of £10.2bn two years ago. More than £500m has been withdrawn by investors in the past four weeks alone, which looks to have partly been prompted by rating agency Morningstar downgrading the fund from “bronze” to “neutral” at the end of May, and also confirmation by wealth manager giant St James’s Place to the Financial Times that it was “closely monitoring” its relationship with Woodford. The value of holdings in the fund have fallen by 30% from the June 2017 peak.
Woodford’s plight may serve as a reminder that just because a manager has done fantastically well with one fund, does not mean that they can easily recreate this success elsewhere (you can read more about this here).
If you hold Woodford’s equity income fund, there’s unfortunately not much you can do at the moment. Keep an eye on the firm’s website for updates, and confirmation of when trading should start up again.