Business World

Thursday 20 June 2019

Woodford closes gate on his £4bn flagship fund as investors lay siege

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John Mulligan

John Mulligan

Neil Woodford, the high-profile former Invesco executive who played a pivotal role in a boardroom bust-up at UK transport group Stobart last year, has halted redemptions from his £4.3bn (€4.8bn) flagship fund after being under siege from investors.

The decision to stop investors withdrawing their cash from the LF Woodford Equity Fund saw shares in some of its portfolio constituents decline.

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The fund's only known Irish constituent is life sciences investment firm Malin Woodford Investment Management owns almost 23pc of Malin, but the stake accounts for just 0.97pc of the fund's total value.

Woodford Investment Management owns less than 3pc of listed Irish firm Hostelworld, a holding that it steadily reduced last year.

While that holding was held in the Woodford Equity Fund, the latest update for the fund does not list Hostelworld as part of its portfolio.

Any positions in the equity fund that round down to 0pc of the value of the fund are not listed as an investment.

Malin, backed by the Ireland Strategic Investment Fund, has had a troubled past, having written off eight of the 18 investments it made since it floated on the Irish Stock Exchange in 2015.

Launched in 2014, the LF Woodford Equity Fund is meant to be a long-term investment vehicle. It holds investments in stock market-listed and private firms.

It has performed poorly in the past three years compared to the FTSE.

As of the end of April, it's down 6.78pc over a three-year period, and has shed 8.33pc in the past year. Since its launch it has generated a return of 11pc, compared to a 34.1pc return by the FTSE All Share Index.

Its biggest holding is UK housebuilder Barratt Developments, which accounts for just over 7.5pc of the fund's holdings.

Other big shareholdings are in US biopharma firm Theravance Holdings and litigation finance provider Burford Capital.

In a statement, Woodford said that it had secured agreement to suspend dealing in shares in the LF Woodford Equity Income Fund "with immediate effect and until further notice".

It added: "After consideration of all relevant circumstances relating to the fund's assets, we have, in conjunction with Woodford Investment Management, the appointed investment manager, come to the conclusion it is in the best interests of all investors in the fund to suspend the issue, cancellation, sale, redemption and transfer of shares in the fund."

The so-called redemption gate was brought down by Woodford when Kent County Council sought the return of £250m of its capital. An average of £10m a day had been reportedly leaching from the fund over the past four weeks.

Concern around the impact of client redemptions and risk-taking drove fund rating company Morningstar to recently downgrade the fund, citing Woodford's "extreme" portfolio positioning.

"This period of suspension is intended to protect the investors in the fund by allowing Woodford ... time to reposition the element of the fund's portfolio invested in unquoted and less liquid stocks, in to more liquid investments," said Woodford yesterday.

Suspending trading in a fund is usually only used as a last resort to protect those investors choosing to remain in the fund from a fire-sale of the fund's assets - something a number of property funds were forced to do around Britain's Brexit vote.

Additional reporting: Reuters

Irish Independent

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