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Woodford investors could get election boost

Woodford investors could get election boost

Investors in the stricken Woodford Equity Income fund received a boost from the general election result, as many of the largest holdings in the fund enjoyed a significant share price rise this morning (December 13).

The election of a Conservative majority government saw a rally in sterling and in stocks exposed to the UK domestic economy.

When he ran the £3bn Woodford Equity Income fund, Mr Woodford filled it with stocks exposed to the UK domestic economy. This contributed to a period of severe under performance relative to rival funds that had invested in UK listed stocks that derived more of their earnings from overseas.

This meant Mr Woodford's rivals benefitted from the weakness in the value of sterling but would mean Mr Woodford would benefit as and when sterling became stronger.

The Woodford Equity Income fund was suspended on June 3 following a period where outflows ran to £9m a day. 

The fund is now being run by BlackRock and PJT Partners, who are tasked with selling the assets, winding up the fund, and returning cash to investors.

The intention is to make a payment to clients of the fund in January, based on cash raised from the same of listed equities.

The largest holdings in the fund today (13 December), according to data from FE Analytics, are Barratt Developments and Bovis Homes, the shares of which are up 11 per cent, and Taylor Wimpey, which was up 14 per cent.

When those shares are sold then their value, and potentially the value of the cash to go back to investors, has risen. An update from the fund’s administrator, released this morning, indicated the intention was for the fund to formally cease to exist from January 18, with the assets valued for the final time on January 17, and cash returned to investors shortly afterwards.

The first tranche of the capital is to be returned on January 20. BlackRock has raised £1.65bn from selling assets, and this cash will be split among investors.

Invesco’s Mark Barnett, who is also embattled, could also benefit from today's general election result - though to a lesser extent.

Mr Barnett took over from Mr Woodford as manager of the £6bn Invesco High Income and £2.8bn Invesco Income funds, which have both been among the worst performers in their sectors over the past three years.

He followed a strikingly similar strategy to Mr Woodford in recent years, taking the view that the UK economy would perform better than the wider market expected. 

Mr Barnett was sacked from one of those mandates, the £1.3bn Edinburgh investment trust, this week due to poor performance.

Among his top holdings are Next, a clothing retailer, which has risen 4 per cent, and Tesco, which has risen by the same amount. 

david.thorpe@ft.com

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