In an email to financial advisers, Woodford accepted some responsibility for the fund's poor performance.
In an email to financial advisers, Neil Woodford has apologised for suspending trading of the flagship Woodford Equity Income fund and accepted some responsibility for the fund’s poor performance.
Last week, due to an inability to meet a wave of investor redemptions, Woodford froze withdrawals from his flagship Woodford Equity Income fund, trapping almost £4 billion of client money.
Writing to advisers invested in the fund, Woodford said: “It is not a decision that has been taken lightly, and we fully understand the concern and frustration this will have caused within your client base.”
Woodford noted that his own investment decisions had been partly to blame for the fund poor performance: “The performance of the fund has been disappointing for some time. This underperformance has, in part, been the product of some company-specific issues within the portfolio.”
Addressing the lack of liquidity that forced the fund to shut it doors, Woodford said that he had previously pointed out his intention to move the fund away from unquoted and less liquid holdings. "That shift started in February and further carefully managed activity is anticipated in the weeks and months ahead to execute the rest of this shift," he said.
Woodford also argued that the fund’s poor performance was the result of “market conditions.” He said: “I have also been battling against a momentum-driven market, where a narrow band of stocks in which I have chosen not to invest have driven market returns in a largely valuation-insensitive manner.”
These conditions persisted longer than expected, says Woodford.
Over the past three years, the fund has returned -17.7%. In comparison the average fund performer in the IA UK All Companies sector has returned 30.7%.
Woodford also attempted to make his case for why financial advisers should stick with his fund once it re-opens.
While noting the portfolio will hold much more liquid stocks, Woodford doubled down on his fund’s core investment strategy: undervalued UK-facing stocks.
Before the fund suspended trading, Woodford had argued that UK stocks were at historically cheap levels, creating “a valuation opportunity, the likes of which I haven’t seen for more than 30 years.”
Woodford reiterated this point in his note to financial advisers, arguing that: “Many companies that generate most of their revenues from the UK economy are as cheap as I can ever remember.
"In my view, every position within the portfolio will continue to be united by one thing: under-valuation. Every asset in the portfolio has a fundamental value that significantly exceeds its share price.”
Woodford also noted that while global growth appears to be slowing, the UK economy has enough “internal momentum to withstand the growing global headwinds.”
Even now he refuses to admit that he has got it totally wrong since leaving Invesco and the resources that were at his disposal. No excuses please, he and he alone bears the responsibility for this sorry mess. Anyone remember Manek?