Woodford – fund suspended until Dec; faces sack from WPCT

Neil Woodford’s flagship Equity Income Fund is likely to be suspended until December, locking in hundreds of thousands of investors, to give the beleaguered fund manager time to sell holdings and pay for customer withdrawals.

Fund administrators, Link Asset Services, told investors today it would probably take four months before the fund was able to reopen; the fund was ‘gated’ in early June to prevent customers from taking money out after being overwhelmed by withdrawals.

Investors, already furious that the former rock star stock picker has continued to take millions in pounds in fees while their money remains locked up, had been braced for another 28-day extension, rather than four months.

In a statement to investors on his website, Woodford said: ‘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.

The suspension of dealing is likely to last until early December while we implement the strategy to reposition the portfolio in order for the fund to be reopened at that time,’

Link said. ‘In our view, this is a realistic amount of time for Woodford to complete a measured and orderly re-positioning of the fund’s portfolio of assets.

‘the former rock star stock picker has continued to take millions in pounds in fees while their money remains locked up’

To add to the controversy, Link extended the equity income fund’s suspension on the same day Woodford was revealed to have sold more than half his shares in his separately listed investment trust – whose board is considering sacking him and bringing in another asset manager.

Between 3rd July and 8^th July – i.e. a month after the Equity Income fund was frozen – Woodford sold 1.75m shares in Woodford Patient Capital Trust, netting him something just shy of £1m.

Woodford, who only told the fund’s board about the share sale on 27^th July, said he needed the money for a tax bill and other commitments; Patient Capital Trust is one of several managed by Woodford Investment Management.

In a move that will hardly improve the mood of those in his fund, the explanation from Woodford’s company to the board for selling his Patient Capital Trust shares said: ‘Whilst a reluctant seller, between 3rd and 8th July Mr Woodford sold 1.75m of his WPCT shares (around 60% of his holding). The sole reason that he did so was in order to meet personal financial obligations, including a tax liability.’

‘(Woodford) said he needed the money for a tax bill and other commitments’

The board said that although it was not strictly required to disclose Woodford’s share sale, it had decided to publicly release the information, although the fury of the backlash had they not done so, yet it became public, can only be guessed at; Woodford is left with 1.25m shares representing 0.14% of the Patient Capital Trust.

In a move that will be seen by many as insensitive at the very least, Woodford said he was forced to sell the shares after taking no income or dividends from Woodford Investment Management and blocking withdrawals from the equity income fund.

A spokesperson for Woodford said: ‘Neil remains invested in WPCT and completely committed to the early-stage asset class and its long-term investment potential.’

Structured as an investment company, Woodford Patient Capital Trust has an independent board whose job is to act in the interests of shareholders; the board revealed it was considering replacing Woodford as the fund’s portfolio manager after receiving approaches from other potential candidates.

It’s statement said: ‘Whilst the board remains confident in the portfolio manager’s commitment to WPCT and the current day-to-day management of the portfolio, the board intends to engage with a broader range of third-party managers in order to undertake a full assessment of all potential management options, which may or may not lead to a change in the company’s management arrangements.’

Being replaced would be a further blow to the reputation of the UK’s most famous fund manager and a former favourite with retail investors; after building his reputation at Invesco, Woodford launched his own business in 2013 but he made bets on troubled companies such as Kier and Purplebricks that led to disastrous performance.

Regardless, his spokesperson continued: ‘Neil is proud of the portfolio created and the considerable potential some of these companies have to achieve commercial success.’

Shares in Woodford Patient Capital Trust, down almost 40% this year, fell just over 5.25% to 50.5p on Monday.