An article in the Financial Times said the Woodford Equity Income fund has lost £560m in less than four weeks, taking assets under management from £4.33bn in April to £3.77bn this week, based on Morningstar data, as investors pulled money out due to ongoing weak performance.
The FT report said the continued outflows from the star manager’s fund has “caused alarm among some of the fund industry’s most senior executives” and is being “examined by regulators”.
It said the FCA had declined to comment.
Link providing monthly liquidity reports
Woodford Investment Management issued a statement on Thursday stating the regulator has not been in touch directly about the struggling fund.
The statement said: “The FCA has not been in direct contact with Woodford. As a matter of course, the FCA monitors large funds where outflows have occurred and Link, the ACD, has been providing fund liquidity analysis reports on a monthly basis to the FCA for more than a year. This is standard procedure to ensure the fund is managing its liquidity appropriately.”
The fund’s assets have dropped about two-thirds since its peak of £10.2bn two years ago after a series of stock specific issues and outflows. It has suffered 23 months of outflows.
According to FE data, the fund has returned -17.2% over one year and -16.4% over three years versus the IA UK Equity Income peer group’s -4.6% and 17.5%, respectively. Over the past month, the fund is down 8.4% while the sector is down 3.5%.
Woodford blames ‘market malaise’ for underperformance
But Woodford Investment Management said the equities manager remained committed to his process.
It said: “As evidenced this week, we continue to see the widespread enthusiasm for the large, global-facing businesses that dominate the UK stock market, as dangerous from the perspective of valuation risk. It is why the fund is – and has been positioned for some time now – towards undervalued stocks woven into the very fabric of the UK economy.
“This broader market malaise in UK quoted domestic stocks has contributed to the fund’s underperformance over the last month. However, Neil continues to believe this area of the market, such as house builders and other consumer stocks, are profoundly undervalued and offer long-term potential returns.”
Last week, Morningstar downgraded the fund from bronze to neutral and earlier this week St James’s Place issued a statement reaffirming its confidence in Woodford after its chief investment officer, Chris Ralph, was quoted in the FT stating it was scrutinising his management of one of its segregated mandates.
Speaking to the FT in March, Woodford warned he has around “two and a half years” left to turn performance around and curb outflows otherwise he will go “out of business”. A spokesperson for Woodford Investment Management later clarified to Portfolio Adviser that this was a flippant remark.