Business

Woodford flagship fund set to stay locked until December

Neil Woodford Image copyright Rex Features

Well-known stockpicker Neil Woodford's flagship fund is likely to remain locked to investors for several months, it has been confirmed.

The suspension of his Woodford Equity Income Fund is unlikely to be lifted until December.

Mr Woodford told investors he was sorry for their "frustration, inconvenience and anxiety" over the suspension.

Investors in the Equity Income Fund have not been able to access their money since 3 June.

'Best outcome'

The latest update on the suspension was revealed by the fund's authorised corporate director Link Fund Solutions in a letter to investors. Link has to review the suspension every 28 days.

Link said it considered that a suspension until December would give the manager time to reposition the fund's portfolio into more liquid assets,

"In our view, this is a realistic amount of time for Woodford to complete a measured and orderly re-positioning of the Fund's portfolio of assets, ensuring that there is adequate liquidity whilst preserving or realising the value of the assets," Link said.

"We have concluded that this approach would represent the best outcome in terms of value, time and equal treatment for all investors. Importantly, it would allow all investors to choose whether they wish to remain invested in or to withdraw their investments from the fund."

Mr Woodford said that he anticipated the fund would reopen in early December "as we navigate through the changes to the portfolio previously articulated".

"I understand the frustration, inconvenience and anxiety the continued suspension of the fund will be causing you and I am extremely sorry for putting you in this situation," he added.

Ryan Hughes, head of active portfolios at investment platform AJ Bell, said: "This gives much-needed clarity for investors but they are likely to remain concerned.

"The fact that Link and Woodford have given a timeframe suggests they have some confidence in the fund re-opening in December, but this will still mark six months of fund suspension that investors have had to navigate."

Big name

Withdrawals were frozen in early June after rising numbers of investors asked for their money back.

Mr Woodford is one of the UK's biggest names in stockpicking - which is when a fund manager analyses the potential of different stocks to try to decide whether or not they will make a good investment.

He was widely celebrated for previous success and was backed until the suspension by huge investment supermarket Hargreaves Lansdown - but both now face questions over how business was conducted, amid criticism from investors.

Fund investor Gus Harris-Reid, from Edinburgh, told the BBC he had not expected the fund to be reopened on Monday.

He said: "As many have been calling for, I would like to see Woodford cease charging management fees, or at least reduce them, until the fund reopens."

What happened to the Woodford fund?

When the fund launched five years ago, Mr Woodford's previous record meant thousands of investors trusted him with their money.

At its peak, the Woodford Equity Income Fund managed £10.2bn worth of assets, such as local authority pension funds.

In its first year, there were returns of 18% on investors' money, compared with an average rise of only 2% on the London Stock Exchange at the time.

However, far from uniquely, this was followed by struggles in the past couple of years.

Image copyright Reuters
Image caption Neil Woodford is under the regulator's microscope

As a result, the fund has brought very little return for investors who have been in it throughout. Figures from FE Analytics show the fund has made a total return of 0.36% since its launch.

It also meant that investors pulled out at an increasingly rapid rate. The fund now manages £3.7bn, according to financial services and research firm Morningstar.

Owing to this "increased level of redemptions", Mr Woodford and his backers said investors would not be allowed to "redeem, purchase or transfer shares" in the fund. In effect, it was suspended while they reordered the fund.

There has been criticism that in the meantime, Mr Woodford has continued to charge management fees to customers.

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