Woodford – answering your questions

We address the most common queries about the suspension of trading in Woodford Equity Income Fund.

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  1. Rob Morgan

When will the Woodford Equity Income Fund reopen?

The suspension of Woodford Equity Income Fund is designed to allow Woodford Investment Management time to reduce the number of unquoted stocks held by the fund in an orderly way. We anticipate there will be a gradual transition to larger, more liquid stocks, which can be more easily traded.

When the fund’s trading suspension is lifted, the make-up of the portfolio should mean investors can buy or sell units in Woodford Equity Income as usual, but we do not know how long the process will take. Mr Woodford will need to balance regulatory requirements with the interests of fund holders in regard to maximising value from the portfolio.

We will continue to monitor development closely and provide updates as soon as we have more details. If you're a Charles Stanley Direct customer invested in the fund, keep an eye on the Research section of the website.

Why can’t I find the Woodford Equity Income fund on your website?

In light of the situation, our fund custodian has removed this fund from our “fund universe”.  Once it recommences trading, it will be added back.

Does the fund still have a value?

Yes, the fund will continue to be valued based on the collective value of the underlying investments. If you have a holding, your portfolio will therefore continue to be updated as normal throughout the duration of the suspension. When the fund reopens the unit price will also be based, as usual, on the value of the underlying assets. Income payments will continue to be paid during suspension to those with 'income' units.

What about Woodford’s other funds?

Neil Woodford has two other funds available to investors, Patient Capital Trust and Woodford Income Focus.

Patient Capital exclusively invests earlier-stage growth companies, many of which are unlisted, and it contains overlap with the element of the suspended Woodford Equity Income Fund invested in these smaller firms. It is structured as an investment trust (explanation here), meaning the manager operates a fixed pool of capital and there is no pressure from investors wishing to cash in their investment. The Trust remains available for investors to buy and sell.

However, due to the holdings held in common with Woodford Equity Income Fund there is the potential for impact on the values of investments held in the Trust, notably where Mr Woodford sells holdings of unlisted companies in order to reposition the Equity Income portfolio, and this prompts a revaluation. Negative sentiment has already taken its toll on the share price of Patient Capital Trust with shares nearly 20% lower than a week ago before the announcement of the suspension of Woodford Equity Income. Shares are now trading on a wide discount to stated net asset value of 28% at the time of writing compared with 14% a week ago, with volatility exacerbated by the gearing (borrowing to invest) used by the Trust. The Trust's Board has stated that operational performance of the underlying portfolio companies is unaffected.

Woodford Income Focus Fund is orientated towards larger, income-generating businesses, although it contains a small amount of exposure to growth-orientated (albeit not unlisted) companies. The nature of the portfolio means it is easier for the manager to trade and meet redemptions compared with Equity Income Fund, and it remains open. It is possible that, as with any fund, very large withdrawal requests could inhibit the options of the manager in terms of portfolio construction.

Are the problems at Woodford likely to spread?

We believe the issues Mr Woodford has encountered as a result of substantial outflows of investor money are unique to his organisation. There are, to our knowledge, no other major funds with a similar combination of significant investor redemptions and large positions in illiquid and unlisted stocks at present. We view this as an idiosyncratic event with little chance of contagion.

There may be some greater price movement in individual stocks owned by Woodford Investment Management over the shorter term as a result of actions to reposition portfolios and provide liquidity, or related to investors' anticipation of such actions. However, Woodford have underlined he is not a 'forced seller'. They have also stated that Mr Woodford has, "the time and space to deliver on his strategy to place the unquoted parts of the portfolio with interested buyers".

What is Charles Stanley’s exposure to Woodford?

Charles Stanley has very limited exposure to Woodford’s funds, though his range has been popular with many self-directed investors. Our range of multi-asset funds has no exposure at all to the manager.

Past performance is not a reliable guide to future returns. This website is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus. If you are unsure of the suitability of your investment please seek professional advice.

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