By 24 April 2017, Woodford had a 7.86% stake in Morses Club, a UK home credit provider which offers small cash doorstep loans ranging from £100 and £1,000. According to the Morses Club website, a 33-week loan has an APR of around 433.5%.
Fellow industry peer Schroders Investment Management is currently the second largest stakeholder, owning 8.8% of the business.
The business has a lengthy history, having been around for over 130 years, but has become considerably bigger following its merger with Shopacheck Financial Services in March 2015.
And with the backing of significant shareholders like Schroders, Woodford, Miton Investment Management, J O Hambro Capital Management and BlackRock, its share price has skyrocketed.
Within the last year, the LSE-listed doorstep lender has seen its share price jump from 90.38p to 131.31p, a 45% increase.
In his last monthly update to investors, Woodford mentioned he had used the proceeds from completely selling British American Tobacco to add Morses Club to the Equity Income portfolio.
Though it currently makes up just 0.03% of the portfolio, the heavyweight manager praised the cash generative potential of the business.
Woodford’s heightened interest in Morses Club comes at a time when the FCA has made a renewed effort to crack down on unscrupulous consumer credit companies.
Though the industry has been regulated by the FCA since 2014, it has criticised consumer credit firms over incentivisation practices and effectively managing risks.
Recently, online lender Wonga came under fire when it suffered a data breach, which put a quarter of a million of its customers at risk of having their personal data stolen.
Morses Capital is far from the only consumer credit-related business among Woodford’s holdings.
Provident Financial, another much larger sub-prime lender, is a major holding for Woodford (4.59% of the Equity Income fund) and appears in the top 10 holdings of Mark Barnett’s £11.2bn Invesco Perpetual High Income vehicle, which Woodford previously co-managed.
It was identified as one of the main detractors from the Equity Income fund’s performance in Woodford’s June update, following the firm’s profit warning after the restructuring of its doorstep lending business.
