Woodford Equity Income – fund to remain suspended

Timescale for lifting the suspension is unknown at this stage and it remains “in the interests of all investors”.

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  1. Rob Morgan

Significant pressure is on Neil Woodford to offload the unlisted companies that caused the suspension of Woodford Equity Income Fund. Yet there may be no easy fix to this situation, and this is why the fund suspension has been extended indefinitely.

Yesterday evening, Link Asset Services (the fund’s Authorised Corporate Director) confirmed it would be renewing the suspension “in the best interests of all investors”, and Mr Woodford stated in a video there was, “no prescribed limit” to the length of the suspension. Link will monitor the situation on a daily basis to consider whether the circumstances have changed and will formally review the suspension at least every 28 days.

This is highly frustrating for investor wishing to withdraw money. However, the manager is in the process of completely reshaping the portfolio towards more easily-traded FTSE 100 and FTSE 250 stocks. To achieve this he needs to sell the unquoted and hard-to-trade smaller companies for as higher price as possible, a complicated exercise, and it is not surprising to see the initial 28 days suspension extended to allow appropriate time.

The process of the sale of the unlisted companies from Woodford Equity Income Fund was already well underway before the suspension on 3rd June. Woodford have been exploring various routes, and it may be best achieved through sales of groups of holdings to interested venture capital investors.

However, the venture capital due diligence process can be a long one, and in this instance the assets vary a lot in size, type and stage of development. Thus the timescale for lifting the suspension is unknown and it could take a long time. The nature of unquoted assets is that they don’t have a market price and a certain value can only be established through a trade sale or stock market flotation. 

In the meantime, the unit price of the fund will, as usual, be dictated by the values of all of the portfolio’s underlying holdings.

The intention remains to reopen the fund with a liquid portfolio of the manager’s best ideas in larger stocks, in order that investors can either choose to sell or keep the fund. There needs to be a balance between bringing the fund back from suspension in a timely manner while protecting value for all fund holders. We will continue to monitor the fund and engage with Woodford regarding further developments.

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