Woodford Equity Income: trading in the fund suspended

3 June 2019 – Trading in Woodford Equity Income fund has been suspended until further notice.

A statement on the company's website this afternoon said that Link Fund Solutions Limited, the Authorised Corporate Director of the fund, today obtained the agreement of the Funds' Depositary to suspend dealing in the fund's shares, with immediate effect and until further notice.

The statement went on to say: “After consideration of all relevant circumstances relating to the Fund's assets, we have, in conjunction with Woodford Investment Management Limited, come to the conclusion 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.

“Following an increased level of redemptions, this period of suspension is intended to protect the investors in the fund by allowing Woodford, as previously communicated to investors, time to reposition the element of the fund's portfolio invested in unquoted and less liquid stocks, in to more liquid investments.

“We will keep all investors appropriately informed about the suspension, including its likely duration.”

Why has this happened?

Neil Woodford is probably the most well-known fund manager in the UK and, over more than three decades, he has produced good returns and has a loyal following. However, over the past couple of years, the performance of Woodford Equity Income fund has been disappointing. Over the past 12 months, the value of the fund has fallen about 18%*. 

This underperformance has been due to a number of factors. Firstly, Neil's style has been out of favour. He holds many unloved and undervalued UK companies, which are domestically-facing. But as Brexit drags on and on, they are not being given the opportunity to recover.

There have also been a number of stock-specific issues. The knock-on effect is that the fund has suffered large redemptions, as many investors have taken their money elsewhere. It has fallen from over £10 billion assets under management to £3.7 billion. 

To meet investor redemptions, Neil Woodford has been forced to sell many of the stocks in his portfolio – even those that were performing well. 

The move to suspend the fund is designed to protect existing investors: rather than having a fire sale and selling everything in a panic, the fund can now take its time and sell holdings more slowly.

Please note that LF Woodford Income Focus is still open, however it has been downgraded to a generic "switch" rating by our fund research team. 

Have investors lost their money?

Investors have not lost their money. Neil just needs some time to raise cash before he can start paying people back again. We will keep people informed as soon as we have more information as to when this might happen. 

What about monthly savings?

Existing monthly savings will still be taken but placed in cash, rather than the fund. If you wish to redirect your monthly savings to another fund, please call out client services team on 020 7384 7300, email us on info@chelseafs.co.uk or write to us at St James Hall, Moore Park Road, London, SW6 2JS.

If you have any further questions, please contact our client services team on 020 7384 7300. 

*Source: FE Analytics, total returns in sterling, one year to 31 May 2019 

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the Chelsea fund research team and do not constitute financial advice.