LF Woodford Equity Income fund suspension to be extended

Posted by Liz Rees in Fund and industry updates category on 30 Jul 19

On Monday 29th July Link Fund Solutions Limited (the Authorised Corporate Director of the fund) issued an update, confirming its expectation that Woodford Equity Income fund is likely to be suspended until early December.

Having considered a number of alternatives, Link considers this course of action is the best way to protect investors' interests as it gives a reasonable period for the team to reposition the fund in a timely and orderly way. This means the fund is less likely to be perceived as a distressed seller and will therefore be able to obtain the best prices possible for the assets it wishes to dispose of.

Woodford announced his intention to move the portfolio away from unquoted holdings (private companies) in March and positive progress has been made in implementing this decision. A number of options are being explored to complete the exercise in a way which will maximise value to shareholders.

During the suspension no requests to sell, buy or transfer units in the fund will be accepted. Link will continue to monitor the situation and carry out a formal review every 28 days. At this point an update will be provided with as much information as possible.

Willis Owen comment

We understand that not having immediate access to your money is extremely frustrating, however the escalation in redemptions left the team with few options to cope with the outflows. Obviously, this situation occurred because the strategy has not delivered the returns anticipated and Woodford has repeatedly apologised for this failure.

As indicated previously, proceeds of the sales have been reinvested into FTSE 350 companies; since the suspension, 80% have been in FTSE 100 companies. This will help to address the liquidity concerns but investors should still bear in mind that the fund retains a bias towards domestically-focused business which could remain out of favour in the event of a no deal Brexit. Mr Woodford retains his conviction these companies are extremely cheap and well-placed in the longer term.

We do take some encouragement from the fact that the fund has been able to place large tranches of shares, often significant stakes in the companies, with other institutional investors, and in some cases the companies themselves.

Many investors are unhappy that fees have continued to be charged and we agree this is unacceptable and have passed on our concerns to Woodford Investment Management. We appreciate that there are ongoing operational and staffing costs but are aware that a number of redundancies have been made to align with the likely lower ongoing level of revenue.

We will let you know if there any further developments to report. Please note that trading in the LF Woodford Income Focus fund and Woodford Patient Capital Trust remains unaffected by this suspension.

Important InformationPast performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Nothing in this article is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment.