Woodford Fund Freeze May Last to December as Blowback Builds
(Bloomberg) -- Neil Woodford’s flagship fund may remain locked until early December, as long-time allies jump ship and pressure on the star stock picker intensifies.
“I understand the frustration, inconvenience and anxiety the continued suspension of the fund will be causing you, and I am extremely sorry for putting you in this situation,” Woodford wrote in a statement for investors. The lockdown, which is entering its third month, may have affected the price of some assets in the fund, but it hasn’t impacted their value, he said.
Woodford halted withdrawals from the LF Woodford Equity Income Fund in early June, facing mounting redemption requests after a run of poor results. Since then, he has lost key executives and long-time investors and been hit by criticism from a top lawmaker. The U.K.’s markets regulator is investigating his decision to freeze the fund.
The fund’s administrator, Link Fund Solutions Ltd., said on Monday that extending the suspension of withdrawals until early December would give “a realistic amount of time for Woodford to complete a measured and orderly re-positioning of the fund’s portfolio of assets.” The status of the fund is reviewed every 28 days.
Suspending redemptions is a rare step for any fund, let alone one, like Woodford’s, that allows clients to make regular withdrawals. He made the decision to buy time to sell down the fund’s holdings of lightly traded micro-, small- and mid-cap stocks that accounted for 97% its assets at the end of May, according to Morningstar data. In response to Woodford’s woes, Bank of England Governor Mark Carney said that funds offering daily liquidity while loading up on illiquid assets are “built on a lie.”
Since the suspension, Woodford has raised at least 300 million pounds ($372 million) in June by selling down some stakes, including those in BCA Marketplace, NewRiver REIT Plc and Oakley Capital Investments. He has done a number of deals since, including selling back shares to Raven Property Group for about 26 million pounds and reducing his stake in Crystal Amber Fund.
In all, he has raised about 650 million pounds, according to Citywire. A spokesman for Woodford’s firm declined to comment on the amount raised.
While Woodford’s flagship is locked, his LF Woodford Income Focus Fund has remained open -- and paid the price. Assets under management in the smaller fund plunged by 42% from May 31 to 287 million pounds as of July 25, according to data compiled by Bloomberg. Shares in his listed investment trust have declined by nearly 33% since the beginning of June. On Monday, the trust said it’s considering ditching Woodford as portfolio manager.
While Woodford tried to raise cash, investors had no choice but to watch and wait as the flagship fund slumped 5.8% in June, before posting a slight gain in July, according to data compiled by Bloomberg. Meanwhile, his firm is pulling in 65,000 pounds a day in management fees, despite calls from regulators, politicians and investment firms for him to waive the charges while the fund is locked.
Among the clients seeking to withdraw their money is Kent County Council, whose investment was valued at 263 million pounds in April. The county authority’s attempt to pull its money out of the fund on June 3 was blocked by the suspension.
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