Woodford Income Focus - update

Level of redemptions may compromise the fund manager’s strategy in terms of portfolio construction and diversification.

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  1. Rob Morgan

We have noted with some concern the level of investor redemptions from the Woodford Income Focus Fund, which have accelerated as a result of the suspension of the Woodford Equity Income Fund  earlier this month.

In our view, the level of redemptions may compromise the fund manager’s strategy in terms of portfolio construction and diversification.

Woodford Income Focus Fund, has predominantly concentrated on larger, income-generating businesses compared with the suspended Woodford Equity Income Fund. However, it still has an element of smaller, less-established business, albeit none are ‘unlisted’ – or not traded on the stock market.

As investors cash in their investments the manager has to sell parts of the portfolio. We understand the Manager has been able to meet redemptions by selling more liquid elements of the portfolio, the predominantly larger, dividend-paying businesses, but that the relatively minor element of the portfolio invested in smaller businesses could have grown more prominent as a result.

Ordinarily, this kind of portfolio would not be subject to liquidity concerns, but the exceptional level of withdrawals from investors in the fund may have, in our view, led to a significant impairment of the fund management process. Furthermore, the intense scrutiny of events around this and other Woodford funds is likely to be a significant drain on internal management resources.

We will continue to monitor the Woodford funds closely and post any further news on this section of the website.

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