Woodford forced to sell best performing investments

Woodford forced to sell best performing investments

Fund manager Neil Woodford will be forced to sell the best performing assets in his stricken Equity Income fund as he sells down the unquoted investments in the fund.

A representative of Woodford Investment Management confirmed to FTAdviser that from the launch of the Equity Income fund in June 2014 to the end of February 2019, the unquoted investments contributed 37 per cent of the positive investment performance, despite an average of just 8 per cent of the fund being invested in unquoted holdings in that time period. 

The fund returned 15.5 per cent in that time, before fees, with about 5 percentage points coming from the unquoted portion of the portfolio. 

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The Equity Income fund was suspended on June 3, after outflows hit £9m every working day in May, and Kent County Council informed it would take £255m from the fund at the start of June.

The unquoted holdings in the fund have sparked some controversy as under Ucits fund rules Mr Woodford is not permitted to have more than 10 per cent of the Equity Income fund in unquoted holdings. 

But as the volume of outflows increased, Mr Woodford sold quoted holdings, pushing up the percentage of the fund that is unquoted.

Andrew Bailey, chief executive of the Financial Conduct Authority, told the Treasury Select Committee last month that the fund had already breached the 10 per cent limit twice some months ago.

Mr Woodford has committed to having no unquoted holdings in the fund by the end of this year, and has hired a firm to help him sell the assets. 

Quoted company shares can be sold more quickly than those of unquoted companies, and so far Woodford Investment Management has confirmed that no unquoted holdings have been sold since the fund was suspended. 

In his explanation to shareholders of the decision to suspend the fund, Mr Woodford said he didn’t want to be a "forced seller" of assets, as that would mean achieving lower prices.

The Woodford Equity Income fund has lost 18 per cent over the past three years, compared with a gain of 35 per cent for the IA UK All Companies sector over the same time period, according to data from FE Analytics.