Neil Woodford apologises again, but refuses to back down on fees

Kyle Caldwell
24 September 2019

Woodford has refused to budge on his stance for continuing to charge investors while the fund is suspended

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Neil Woodford has again apologised for the continued suspension of his flagship fund LF Woodford Equity Income, while also reiterating that a management fee will remain in place.

In an update to investors yesterday (23 September) Woodford said: “We are very sorry for the continued suspension and understand the concern it will be causing investors.

"We remain fully committed to getting the fund into a position that delivers the best possible outcomes for our investors – for those who wish to withdraw their money from the fund when it reopens and for those who wish to stay.”

But, in respect of management fees, of which Woodford has come under fire for continue to charge investors while the fund is suspended, Woodford refused to budge on his stance.

Accompanying the update, addressing the specific question as to whether a management fee will continue to be charged, Woodford Investment Management said: “The company will continue to charge a management fee as we focus on repositioning the portfolio, to cover the infrastructure and resource costs associated with running an actively managed fund.”

Also as part of the update, Woodford noted that progress is being made to make the portfolio more liquid. He added that to date 84% of the proceeds from share sales made to reposition the portfolio since the suspension have been reinvested in FTSE 100 companies.

The fund is expected to remain suspended until at least December. In a separate update yesterday from the Link Fund Solutions, the authorised corporate director of the fund, point out that from the date the fund was suspended, 3 June, up to 20 September, LF Woodford Equity Income posted a loss of 12.8%. In contrast, the fund’s benchmark, the FTSE All Share Total Return, gained 4.3% over the period.

As Adrian Lowcock, head of personal investing at Willis Owen, has previously pointed out, the poor performance is to be expected. At the end of August, he said: “The challenge he faces is huge and the market backdrop hasn’t helped.”

On the one hand, Lowcock added, trading costs incurred by Woodford’s rebalancing will be eating into returns. At the same time, the fund has continued to suffer from specific stock-related issues.

For example, one of Woodford’s largest holdings, Burford Capital, saw significant damage to its share price after US investment company Muddy Waters put out a very critical note.

More recently, Industrial Heat’s valuation has taken a hit, while Eddie Stobart has suspended trading. Other holdings such as Kier Group have seen profit warnings. 

This article first appeared on our sister website Money Observer

Comments

Neil Woodford

In my opinion, Neil Woodford is a charleton.

The Woodford scam

I don’t.... and can’t afford to invest. But. For every idiot who has been roped into this.... Get out quick! This will be a huge fail and you will lose everything!

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