Woodford Investment Management, the fund manager run by one of the UK’s best-known fund managers, Neil Woodford, has halted investor redemptions from its £3.7 billion equity income fund, following a request in May from Kent County Council to redeem £250 million from the fund and a string of negative press headlines.
The freeze on withdrawals, which could last for two months, is intended to give the fund time to restructure, without holding a disastrous fire sale of assets to meet redemptions, but has been seen as giving a body blow to the reputation of a high-profile investment star, who built his reputation at Invesco Perpetual for stock-picking, before setting up on his own in 2014. Redemptions from the fund have raised its unlisted assets to over 10% of total assets, triggering the suspension in redemptions.
The fund was forced into drastic action, which has shocked investors, after seeing its assets fall from £10 billion two years ago to under £4 billion. A significant proportion of its investments are in more illiquid shares and it has been hit by a run of bad news, culminating in a profits warning by construction group Kier. Woodford held 20% of Kier’s shares and it has also been a shareholder in other companies to suffer market falls, including pharmaceuticals company, Circassia, the IP group, Allied Minds, the estate agency PurpleBricks, and doorstep lender, Provident Financial.
Woodford’s fall from grace led to falls in the value of the equity income of the fund’s major listed holdings, such as Barratt Developments, Burford Capital and Taylor Wimpey, as investors anticipated forced selling in them. Pensions trade body, the Pensions and Lifetime Savings Association (PLSA) called for the regulator to take action. Neil Woodford earned his reputation as a value investor with a strong contrarian streak by avoiding tech stocks in the dot com boom, selling out of banks before 2008 and going into unfancied tobacco stocks.