Neil Woodford’s apology to investors trapped in his £3.7bn Equity Income fund has been welcomed by the investment industry.
In a YouTube video, Woodford said the suspension was a necessary move to protect their interests, because he would otherwise have to sell stocks at “disadvantageous” prices to meet heavy redemptions.
He said: “When it is appropriate we will open the fund so that you can buy and sell as normal. As difficult a decision as this is, and clearly frustrating for you, our investors, we felt that this was necessary to protect your interests.
“The situation that we confronted was that we were seeing a lot of outflow in the portfolio. As a result of that increased level of redemptions what we were seeing was the stock market in a way anticipating the fact that we would have to be sellers of stocks to meet those redemptions.
“We felt that the prices that we would be able to achieve in order to meet those redemptions would be disadvantageous for our investors.”
Woodford versus HL messaging
Woodford’s response to his fund suspension has been more warmly welcomed than Hargreaves Lansdown, which has underwhelmed the investment industry.
AJ Bell head of active portfolios Ryan Hughes said: “Communication is key in situations like this and therefore it’s very important that Woodford keep his investors as informed as possible during the suspension process.”
Meanwhile, Adrian Lowcock, head of personal investing at Willis Owen, said providing details on plans was the right thing to do as speculation around what will happen next increases.
But he added: “Woodford’s situation is not about the performance of the fund which, whilst disappointing, it could turn if sentiment to the UK turns. It is about the structure of the portfolio and the unlisted element which changes its nature and suitability for investors.”
Darius McDermott, managing director of Chelsea Financial Services, also agreed. “Clearly this has been the most difficult period of Neil’s career and it was good for him to apologise.”
Equity Income vs Income Focus
Woodford concluded the video stating that the suspension of dealing in the fund will provide him with “the time and space” to execute that strategy to reduce its exposure and redeploy that capital in the FTSE 350 and primarily in the FTSE 100.
Hughes said: “Woodford has suggested in the video that all of the illiquid positions will be sold and the proceeds reinvested into liquid large caps which would dramatically improve the liquidity profile of the fund.
“It will be interesting to compare the restructured Equity Income fund to the Income Focus fund, which is already positioned towards large cap companies as they may end up looking very similar.”
Woodford concluded the video, stating: “I am extremely sorry that we’ve had to take this decision, we will keep our investors informed, we will use this time to reposition our fund in the way that we’ve said. We understand our investor’s frustration and all I can say in response to that is that this decision was motivated by your interests, our investors.”
