Jeff Prestridge  

Odds are against Woodford

Jeff Prestridge

Jeff Prestridge

But there is no doubt that the pressure is on, no more so than on his closed flagship fund Woodford Equity Income. After five years, the fund’s unit price is below square one (£1) and the fund’s assets are shrinking at a rate faster than Japan’s population. 

From a high of £10.2bn in May 2017, Woodford Equity Income is now a shadow of its former self, with assets of just £3.8bn.

The shrinkage is a result of poorly performing investments and investors heading for the exit.

To meet these redemptions – before shutting shop – Mr Woodford had no choice but to offload investments. With the likes of ratings agency Morningstar having downgraded the fund, and now the closure, the future looks bleak.

Some eight weeks ago, an investment adviser I respect hugely said a possible way forward for Mr Woodford was for the Equity Income fund to be converted into an investment trust.

This, he said, would allow Mr Woodford to keep Equity Income’s portfolio intact, rather than constantly having to sell holdings to meet investors’ requests for their cash back.

Restructured as an investment trust, any continued withdrawal of investor support would then be reflected in Equity Income’s share price. It could result in the shares trading at a discount – to the annoyance of some investors – but it would stop Mr Woodford having to dismember his portfolio, giving everyone some respite.

Of course, Mr Woodford may come good again. Indeed, he continues to argue that many of the stocks Equity Income holds are “profoundly undervalued and offer long-term potential returns”. 

Personally, I would like him to prove his doubters wrong (I do not hold any of his funds). Not for the sake of his reputation, but for the financial good of those investors who have entrusted him to look after their long-term wealth.

But the odds against him are stacked against him like never before.

Jeff Prestridge is personal finance editor of The Mail on Sunday