Neil Woodford’s woes go from bad to worse 

Neil Woodford has lost the support of two big supporters after his move to block investors from accessing their cash earlier this week. 

Neil Woodford has lost the support of two big supporters after his move to block investors from accessing their cash earlier this week

In a move that has rocked the fund management industry, Woodford opted to close the doors of his main fund - Woodford Equity Income - in order to give himself “time and space” to raise money to fund investor redemptions. 

The investments he is offloading are either unquoted or unlisted shares, meaning they are illiquid and not easy to trade quickly, so therefore the fund has been closed to give Woodford some breathing space. Such a move protects investors remaining in the fund, as it avoids a scenario of forced sales that would run the risk of the investments being sold for less than they are worth.

At this stage it is unclear how long the fund will be closed for, but its suspension will be reviewed at the end of June by the fund’s administrator. 

Two of its biggest supporters, though, have thrown in the towel. St James’s Place, the wealth manager, has dropped Woodford as the manager of one of its internal funds, which had £3.5 billion in assets under management. Separately, Omnis Investments Limited, an asset manager, has fired Woodford as manager of its £300 million Omnis Income & Growth fund.

Both these funds are completely separate funds from Woodford Equity Income.

In addition, online broker Hargreaves Lansdown, which had been a huge supporter of Woodford, earlier this week dropped Woodford Equity Income from its Wealth 50 list of favourite funds.

As well as losing key backers, Woodford has received criticism from Nick Morgan MP, chair of the Treasury Committee. She called on Woodford to waive the fund’s fees while it is suspended, but such a move has not been forthcoming.

Morgan says: “Investors in the Woodford fund have been locked out of accessing their cash. Yet it has been reported that Mr Woodford is taking in nearly £100,000 in management fees a day.

“The suspension of trading has provided Mr Woodford with some breathing room to fix his fund; he should afford his investors the same space and waive the fund’s fees while the fund is suspended.”

In addition, the Financial Conduct Authority (FCA) is closely watching developments. It said in a statement: “We expect all firms involved to uphold their obligations to act in the best interests of all investors and to ensure the fund's assets are sold in an orderly manner. A suspension should last no longer than necessary to allow the fund to build up sufficient liquidity to meet redemptions again.”

Morgan adds: “The FCA has rightly said that it is closely watching the fund. The Treasury Committee will no doubt raise this troubling episode, and what lessons can be learnt, when we take evidence from the FCA and Bank of England.”

 

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