Woodford investor suspension extended until December – and charges still apply
Investors will not be allowed to retrieve their cash in Woodford Equity Income Fund until bosses sell off investments in unlisted firms.
Neil Woodford’s flagship investment fund will remain suspended until at least December but investors will still be charged fees, the former star banker has revealed.
The Woodford Equity Income Fund has been working overtime to recoup investors’ cash since the suspension in June after customers attempted to withdraw hundreds of millions of pounds which the fund did not have to hand.
Mr Woodford said: “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.”
The businessman added that his fund has started selling its investments in unquoted and harder-to-sell shares and reinvesting the cash into more liquid FTSE 100 and FTSE 250 shares instead.
Around 80% of the money taken out of the illiquid stocks has been reinvested in FTSE 100 companies, he said.
However, the company said a long extension was required to ensure assets can be sold in a “timely and orderly way” and not at “distressed prices”.
Link Fund Solutions (LFS), the company that administers the fund on Woodford Investment Management’s (WIM) behalf, said the extension of the suspension was to allow time to ensure there is enough money to pay investors who want to cash out.
It said: “LFS has concluded that this approach represents the best outcome in terms of value, time and equal treatment for all investors.
“Importantly, it allows all investors to choose whether they wish to remain invested in or to withdraw their investments from the fund.
“The ongoing work to reposition the portfolio is designed to ensure that there are liquid assets available for these purposes, while continuing with the objectives and investment strategy of the fund.”
The fund has been heavily scrutinised since the suspension, particularly over whether rules were breached on how much investors’ cash should be put into illiquid stocks.
Mark Carney, governor of the Bank of England, expressed his own concerns at a recent select committee hearing.
He said: “These funds are built on a lie, which is that you can have daily liquidity for assets that fundamentally aren’t liquid.
“And that leads to an expectation of individuals that it’s not that different to having money in a bank.”
The fund was worth around £10 billion at its peak in 2017, but has fallen to between £3.5 billion and £4 billion.
The FCA has launched an enforcement investigation into the Woodford saga.
On the decision to continue charging fees, Woodford said: “The company will continue to charge a management fee as we focus on repositioning the portfolio, to cover the infrastructure and resource costs associated with running an actively managed fund.”