Woodford losses since suspension undermine fire sale denials

Neil Woodford has racked up more losses than gains in his fire sale of Equity Income holdings despite assurances that the suspension would limit pressure to sell assets at distressed prices.

Bloomberg calculations show that the beleaguered equities manager lost money on eight out of 10 positions he sold in their entirety since freezing his fund at the start of June. The total losses from the sales were £43.5m.

The analysis excluded dividend payments from the calculations of gains and losses.

But Woodford’s losses on stocks he currently holds look to be much higher. Shares in one of his largest holdings Provident Financial have fallen around 35% in the last year and are down 84% from their peak price of £26.36 per share in November 2015.

Woodford faced the biggest hit in retail and leisure property trust Newriver Reit, followed by veterinary pharmaceuticals firm Benchmark Holding and UK social video company Brave Bison.

Woodford Equity Income fire sale

Source: Bloomberg

The only two stocks Woodford made money on during his sales spree were BCA Marketplace and Oakley Capital.

He sold his remaining shares in BCA for 241.5p a share, a £59.6m profit on its volume-weighted average price of 139p in 2015 when Woodford bought the British car auction company. Selling his Oakley shares bagged him another £33.8m.

A representative from Woodford Investment Management told Bloomberg that Woodford and his team “continue to make progress” in building a “much more liquid portfolio” for the frozen equity income fund. When it reopens, the fund “will continue to be focused on undervalued companies, and the majority of them will be FTSE 100 and FTSE 250 index constituents,” the spokesman said.

Woodford suspended his Equity Income fund on 3 June after it was unable to cope with a wave of redemptions.

At the time Woodford Investment Management told investors that by temporarily halting trading Woodford would avoid becoming a forced seller with the former star manager adding in an update a month later he was “confident” he would not have to take big discounts as the underlying assets in the fund are “fundamentally attractive”.

Willis Owen head of personal investing Adrian Lowcock points out there is a difference between taking a loss on an investment and being a forced seller.

“Many of the investments Woodford held prior to the suspension of the fund and indeed the ones he is looking to sell had underperformed the market and his investment expectations. As such the fund was sitting on a loss,” said Lowcock.

“This is one of the big issues for Woodford as effectively he has to reposition the portfolio and draw a line on the underperformance his investors have experienced as he will have realised much of those losses.  The ‘new’ portfolio should look different and it is this which will hopefully see a turn in his fortunes.”

Lowcock added that valuations and share prices could fall for other reasons and Woodford will suffer because he is a seller.

“In this respect he is still a bit of a forced seller, although he could wait a short while to sell the investment, but he is not necessarily taking a below market price for the investment.”

Woodford Equity Income currently has £3.1bn in assets under management according to Trustnet. The fund’s authorised corporate director Link Fund Solutions has said the goal of lifting the suspension by Christmas “remains achievable”.