Neil Woodford has spent the two months since his £3.1bn Equity Income fund was suspended buying the shares of FTSE 100 giants BT, British American Tobacco and International Airlines Group.
The fund was suspended in June after a wave of redemptions that reached £9m every working day in May.
A particular problem for Mr Woodford was the fund’s substantial exposure to unquoted and illiquid stocks. The rules that govern open-ended funds in the UK forbid managers from having more than 10 per cent of a fund in unquoted assets and redemptions mounted up, Mr Woodford was forced to sell his liquid holdings to raise cash, putting him in breach of the rule.
When the fund suspension was announced, Woodford Investment Management announced that the period of the fund’s suspension would allow time for Mr Woodford to exit those illiquid positions and instead deploy the capital into FTSE 100 stocks he believed represented value.
According to the fund's half-year report covering the six months to June 30, the fund has reinvested 80 per cent of the cash raised from sales into FTSE 100 stocks.
The report shows that in the month of June, Mr Woodford bought IAG, BAT and BT. His single biggest purchase over the six month period was housebuilder Taylor Wimpey.
He has engaged in an extensive round of share sales since the suspension, but in many cases, took a loss on the positions.
Over the six month period Mr Woodford sold shares in BCA Marketplace, Barratt Developments and Imperial Tobacco.
Following the publication of the report, a representative of Woodford Investment Management said: “The interim report reflects the fund’s position as at the 30 June 2019. Neil continues to reposition the portfolio into more liquid FTSE 100 and FTSE 250 companies, but still reflecting the same investment strategy.
"This strategy is founded on a belief that the global economic environment is not as robust as equity markets are implying. Since the fund suspension in early June, 80 per cent of the proceeds from share sales since suspension have been reinvested in FTSE100 stocks."
By owning FTSE 100 stocks, Mr Woodford can raise cash quickly if he needs to. Mr Woodford has long maintained a cautious outlook on the global economy.
The fund administrator Link recently told clients it expects the Woodford Equity Income fund to re-open in December.
In a statement as part of the annual report, the company said: “We continue to reposition the portfolio in readiness for its reopening later in the year. When the Fund does reopen, investors will see a much more liquid portfolio. It will continue to be focused on undervalued companies, but the majority of them will be FTSE 100 and FTSE 250 index constituents.”
david.thorpe@ft.com
