Investors in Neil Woodford’s flagship equity fund are likely to remain locked in until early December following the decision to extend its suspension further.
According to the crisis-hit fund’s administrator Link Fund Solutions, the suspension is being extended in the best interests of investors whilst the portfolio is repositioned with more focus on liquidity. In the meantime, however, investors remain unable to withdraw from the fund.
During the four weeks prior to the fund’s gating in June, ongoing underperformance saw investors pulling out an average of £10 million (€10.9 million) per day.
Keeping the Woodford Equity Income Fund on lockdown until December, Link said, gives Woodford a realistic amount of time to complete a “measured and orderly” repositioning of the portfolio, rather than force the team to sell off assets at distressed prices.
Woodford has been working to move away from unquoted holdings since the fund’s gating in order to fill the portfolio with larger and more liquid stocks, Link said.
The Woodford fund’s fall from grace was sudden. Its assets under management totalled £8.2 billion at the end of 2017. By the end of last year, it almost halved in value to £4.6 billion. When the decision to gate the fund was made to stave off an ongoing investor exodus, assets had fallen to just over £3.7 billion.
The fund’s board recently acknowledged that Neil Woodford could be ousted and another fund manger brought in.
The board said it had been working with Woodford to assess the funding requirements of the trust’s investee businesses and to reduce borrowings which, as at July 25, 2019, were £117.4 million. This equated to a gearing position of 15.95% of net asset value.
It was also widely reported that Woodford sold about 60% of his holding in the trust between July 3 and July 8 to meet personal financial obligations including a tax bill. The share sale made Woodford just less than £1 million, it was reported.
Find out more about the Woodford crisis here.
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