The latest news provides some clarity to investors stuck in the fund
Neil Woodford’s Woodford Equity Income Fund will remain suspended until early December, according to the latest update from the fund’s management service, Link.
Woodford’s fund was originally suspended in June 2019, after a wave of redemptions it was unable to meet.
In numerous statements since the suspension, Woodford has said the suspension was needed in order to rebalance the portfolio away from hard-to-sell illiquid stocks in favour of more liquid large caps.
Until now, he has given little clue as to how long that might take – leaving investors in the fund with no idea when they may be able to withdraw their investment.
The latest news, then, provides some clarity to investors stuck in the fund.
According to Ryan Hughes, head of active portfolios at AJ Bell: “This announcement at last gives a timeframe for investors in the Woodford fund, with Link saying that the fund suspension is likely to last until early December.
“The fact that Link and Woodford have given a timeframe suggests they have some confidence in the fund re-opening in December, but this will still mark six months of fund suspension that investors have had to navigate.”
Moreover, as Hughes points out, investors stuck in the fund are still losing out.
He notes: “Unfortunately the performance figures don’t provide much of a boon for investors, with the fund down 3.3% since it closed in June 3rd, compared to the FTSE All Share return of 5.3% during that time. The past month has seen the fund rise by almost 1% while the market had risen 1.8%.”
In particular, there are concerns that Woodford will be forced to sell his illiquid holdings at rock bottom prices.
At the same time, once the fund does re-open, it is likely to face a renewed wave of redemptions.
Adrian Lowcock, head of personal investing at Willis Owen, points out that there is little surprise in the length of the suspension, given the illiquid nature of the stock being sold.
However, investors continue to pay for the privilege of being unable to access their underperforming investments.
"The news yesterday that the fund will now be suspended until December will mean investors pay around £13 million in fees in total, whether they were willing to remain in the fund or not. It is a shame that Woodford hasn’t responded to requests to cut his fees until this sorry affair is resolved."
This article first appeared on our sister website Money Observer
Why does Neil Woodford insist on continuing to charge excessive fees while Investors in his Woodford Equity Fund continue ‘locked in’ and with poor performance?