By Simon Jessop
LONDON (Reuters) – Neil Woodford, one of Britain’s most high-profile fund managers, has suspended trading in one of his funds after an increase in demand from clients to take their money back.
A favourite of retail investors after he performed well during the financial crisis, Woodford had initially seen assets under management grow sharply after he left Invesco to set up his own firm, Woodford Investment Management.
A period of underperformance has seen billions of pounds exit in outflows, however, and those from its 4.3 billion pounds LF Woodford Equity Income Fund had picked up in recent weeks, prompting its suspension on Monday.
The fund has also faced criticism because of some of its investments in unlisted stocks, riskier investments that are harder to manage in a fund where investors have the right to withdraw their money daily.
Concern around the impact of client redemptions and risk-taking drove fund rating company Morningstar to recently downgrade the fund, citing Woodford’s “extreme” portfolio positioning.
The suspension followed an increase in demand from clients to redeem, and would remain in place until further notice, a statement from Woodford’s authorised corporate director, Link Fund Solutions (LFS), said on Woodford’s website.
“This period of suspension is intended to protect the investors in the fund by allowing Woodford … time to reposition the element of the fund’s portfolio invested in unquoted and less liquid stocks, in to more liquid investments,” it said.
Suspending trading in a fund is usually only used as a last resort to protect those investors choosing to remain in the fund from a fire-sale of the fund’s assets – something a number of property funds were forced to do around Britain’s Brexit vote.
Trading in the LF Woodford Income Focus Fund and Woodford Patient Capital Trust remain unaffected by the suspension, the LFS statement said.
“When LFS elects to resume dealing in the shares of the Fund, we will write to all investors informing them of this fact,” it added.
(Reporting by Simon Jessop; Editing by Huw Jones and Mark Potter)