On the go: Kent County Council’s pension fund claimed on Tuesday it was not warned of Woodford Investment Management’s intention to cease trading, as the investment manager locked in investors’ cash to its flagship fund.
Woodford suspended trading in its Equity Income fund on Monday after investors requested to extract hundreds of millions of pounds over poor performance. There is no timeline for when withdrawals will reopen.
Following a £560m drop in fund value in May, Kent Pension Fund on Monday requested the redemption of its £263m investment. Fund manager Neil Woodford subsequently blocked all withdrawals.
A spokesperson for Kent County Council said: “The announcement on Monday that trading in the investment fund was suspended was not anticipated. Kent County Council is disappointed that, as a major investor in the fund, we did not receive this prior notification.”
The pension committee resolved unanimously to seek to redeem the investment “with immediate effect”, but the efforts were blocked by Woodford.
Kent County Council is disappointed that, as a major investor in the fund, we did not receive this prior notification
Kent County Council Pension Fund
The council signalled that, after trading resumes, withdrawal is still on the table.
“The council is committed to seeking the best outcome and could still seek a managed redemption in order to maximise the benefits for the pension fund,” they continued.
The Woodford investment represents around 4 per cent of the pension fund’s total holdings of £6.4bn.
Woodford emphasised on Monday that the suspension of trading was an attempt to shelter investors from further losses.
“It is in the best interests of all investors in the fund to suspend the issue, cancellation, sale, redemption and transfer of shares in the fund,” read a statement released on Monday.
Suspension of trading by funds is rare outside of market shocks, such as the Brexit referendum result or the global financial crisis.
“This is the first time I can remember where a single fund has been forced to suspend on the basis, really, of performance issues leading to redemptions,” Daniel Godfrey, former chief executive of the Investment Association, told the BBC’s Today Programme on Tuesday.
As a combination of poor performance and investor withdrawals, the fund is down nearly two-thirds from highs of £10.2bn two years ago. The Equity Income fund shrank by £560m in less than four weeks in May this year and currently sits at £3.7bn.
Neil Woodford, who made his name at Invesco before establishing Woodford Investment Management in 2014, pursues a strategy investing in unlisted rather than listed companies, in contrast to the rest of the market.
“What’s happened here is really a salutary reminder that you can’t magic away the illiquidity of the underlying assets by putting them in a liquid fund,” Mr Godfrey said.
The collapse of investor confidence in Woodford is rippling out to affect other UK companies. Hargreaves Lansdown, a fund supermarket that previously recommended Woodford, fell 6 per cent to £21.01 as the FTSE 100 index opened on Tuesday.
Hargreaves urged investors to be patient with Woodford, highlighting that the decision to cease trading would protect the value of remaining assets.
“The suspension is understandably frustrating, but it’s important to remember that the value of your investment will be dependent on the share prices of the portfolio’s underlying holdings, which are not directly impacted by the suspension,” said Emma Wall, Hargreaves’ head of investment analysis.
Hargreaves removed two of Woodford’s funds from its Wealth 50 list on Tuesday, the Equity Income fund and Income Focus fund. But Ms Wall expressed optimism that Woodford would be able to weather the current storm.
“We are advocates of long-term investing and think Woodford’s multi-decade track record remains compelling – but we don’t underestimate the disappointment investors must feel with Woodford’s recent performance,” she said.
Mr Godfrey agreed this was not necessarily the demise of Woodford. As a large fund, it retains the potential to bounce back.
“It could well be the case that in five years’ time, we’re looking at it and anyone who bought when it reopens will have had a great performance,” he said.
Mr Godfrey added: “It’s clearly a very dark and difficult moment for Neil Woodford and his business.”
