Woodford Equity Income: your questions answered

19 June 2019 - It is now more than two weeks since trading was suspended for LF Woodford Equity Income fund. During that time, we have received a number of queries from concerned investors. Below is a summary of the most-asked questions and our answers.

What has happened?

LF Woodford Equity Income fund has temporarily been closed and it is not possible to buy or sell units at the moment. This step has been taken to protect investors in the fund. The fund was facing an accelerated number of redemptions and the company was unable to sell its holdings fast enough – and importantly, at a decent price – in order to meet those redemptions and give money back to investors. Had it remained open, the manager would have been forced to sell holdings at fire-sale prices and this would have have negatively impacted investors.

When will it reopen?

We do not know when the fund will reopen. Woodford Investment Management has indicated that it will be at least three months. We think it could be anything between three and six months. If you would like to be notified when the fund reopens, please call our client service team on 020 7384 7300 or email us at info@chelseafs.co.uk

What happens to my regular savings into the fund?

Monthly savers have a couple of choices. Firstly, they can let the monthly amounts go to a cash account while the fund is suspended. If this is what you wish to do, no action is required.

Alternatively, monthly investors can redirect their savings to another fund. If you wish to take this course of action, please either call our client services team on 020 7384 7300.

Please note that the May monthly contribution is sitting in cash. If you call to change your monthly savings we will also switch this cash into your new fund choice.

There is no charge for switching in the Chelsea FundStore.

What about the income from my investment?

The fund will continue to pay out income. Investors holding income shares will therefore continue to receive their income according to the existing quarterly payment schedule.

Accumulation shares will continue to see distributable income added to the capital element of the share class and reflected in the net asset value.

Is the LF Woodford Income Focus fund closed too?

No this fund is not closed, but we are concerned about negative sentiment towards the company as a whole. It currently has a generic 'switch' rating from the Chelsea fund research team.

What about Neil Woodford's old funds at Invesco – are they impacted?

Invesco Income and Income High Income funds are both still open, but they have been in redemption since Neil Woodford left the company in 2014. This has made it difficult for the new fund manager, Mark Barnett, to add value. He also has similar holdings to the Woodford funds. For these reasons both funds also have a generic 'switch' rating from the Chelsea fund research team.

Why didn't Chelsea do something about this?

Chelsea does not offer any investment advice and so cannot tell you what to do. We did however remove the fund from the Chelsea Core Selection in February 2018 and from the Chelsea Selection in October 2018. The fund also made an appearance in the 'Drop Zone' in the recent Viewpoint.

There is also no exposure to either LF Woodford Equity Income or LF Woodford Income Focus funds in the VT Chelsea Managed funds.

Where can I find more information?

Information can be found on Woodford Investment Management website. There is further information on the Chelsea website and a video with Darius.

Please also do feel free to call our client services team on 020 7384 7300.

Published on 19/06/2019