InvestmentsOct 16 2019

Investors indefinitely locked in to second Woodford fund

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Investors indefinitely locked in to second Woodford fund

The closure of Neil Woodford's investment business has left investors unable to get their cash from another of his funds.

Mr Woodford’s decision to close his firm and resign as manager of the Woodford Income Focus fund has prompted its administrator, Link Fund Solutions, to suspend dealing in the portfolio while it assesses its options. 

Given the weight of redemptions now expected to be made from the £250m strategy, Link is exploring whether to fold the fund into another run by a different firm, appoint a different manager, or wind up the portfolio as it has opted to do with the flagship Woodford Equity Income fund

The Income Focus fund contains none of the illiquid or unquoted assets that have blighted Equity Income. It was created to be a dividend-paying product, more in line with the type of funds on which Mr Woodford made his name at Invesco Perpetual. 

Link's statement read: "LFS expects that the redemptions in the fund will reach a level whereby it may no longer be able to continue to meet redemption requests without prejudicing the interests of both remaining and redeeming investors.

"After consideration of all relevant circumstances relating to the fund’s assets, LFS has come to the conclusion that it is in the best interests of all investors in the fund to suspend the issue, cancellation, sale and redemption of shares in the fund. The period of suspension is intended to protect investors from this anticipated increased level of redemptions in the fund.”

The largest holdings in the portfolio are Imperial Brands, the tobacco company, and Barratt Homes, a FTSE 100 property company. 

The fund has performed dismally over the past year, losing 18 per cent, compared with an average gain of 5 per cent for the average fund in the IA UK Equity Income sector in the same time period. Those falls have helped push its yield above 7 per cent, however.

Investors withdrew £7.5m per working day from the fund in June 2019, in the immediate aftermath of the suspension of the larger Equity Income fund. 

The suspension of Woodford Income Focus means only those Woodford clients with investments in the Patient Capital investment trust can currently access their assets. 

david.thorpe@ft.com