LF Woodford Equity Income (GB00BLRZQB71) has stopped publishing its 10 largest holdings and will not disclose these again until it resumes trading, expected to be in December. This sets it apart from the vast majority of other funds available to UK private investors, nearly all of which disclose their 10 largest holdings. At a time when the fund's manager, Neil Woodford, is selling holdings to reposition this fund, such disclosures can leave it vulnerable to other investors looking to buy its holdings cheaply or bet on their prices falling.
"During the period of the suspension and subsequent repositioning of its portfolio, Woodford Investment Management will no longer publish details of the holdings in [LF Woodford Equity Income Fund],” said Link Fund Solutions, the fund's authorised corporate director, in an update on 23 August. “The interim report and accounts of the fund to 30 June 2019 will include a list of holdings as at that date. It is firmly believed that this is in the best interests of investors."
Woodford Patient Capital Trust (WPCT) and LF Woodford Income Focus (GB00BD9X7109) still list their top 10 holdings but no longer say what percentage of their assets each one accounts for. Before LF Woodford Equity Income was suspended from trading all three funds used to disclose their entire list of investments and how much of their assets each one accounted for.
On the same day – 23 August – Eddie Stobart Logistics (ESL), which has been held by LF Woodford Equity Income and LF Woodford Income Focus, suspended trading of its shares and announced that its chief executive, Alex Laffey, would stand down with immediate effect. This came after a review of the company’s half-year results led its board to decide on “a more prudent approach to revenue recognition”. Eddie Stobart, which had delayed the publication of its half-year results, added that its operating profit for the first half of the year was “likely to be significantly lower than anticipated” and that it intended to review its current dividend policy.
Woodford Investment Management was the largest shareholder in Eddie Stobart Logistics as of 2 August, with 22.89 per cent of voting rights. But determining the exact exposure of each Woodford fund to the company is difficult due to the reduced disclosure of their holdings.
Link added: "We continue to monitor progress of the repositioning of [LF Woodford Equity Income] to ensure that it is on track and our aim of lifting the suspension in December remains achievable. We currently remain of the view that this is a realistic timeframe, and therefore have decided that it remains in the interests of all investors for the suspension of dealings to continue."
Link also noted that the fund's performance has struggled since it was suspended. Between 3 June and 21 August LF Woodford Equity Income lost 11.15 per cent, while the FTSE All-Share index rose 1.52 per cent. Woodford Investment Management said this was primarily down to the difficulties of Burford Capital (BUR), whose share price had declined sharply amid a dispute with hedge fund Muddy Waters Research, and its holding in unquoted cold-fusion technology company Industrial Heat.
“The suspension did have an immediate impact on performance in the short term, with the fund underperforming its benchmark significantly during the first 28-day period," said Woodford Investment Management. “The situation improved during the second 28-day period in July, with the fund outperforming, albeit marginally. However, over the latest 28-day period of suspension the fund has underperformed its benchmark which can be primarily attributed to the price decline of two of its larger holdings, Burford Capital and Industrial Heat.”
Woodford Investment Management added that it was “not responsible for unquoted valuations across any of our funds”.
Woodford Patient Capital Trust is also facing performance setbacks after Link Fund Solutions, which is responsible for valuing the trust's portfolio, decided to reduce the valuation of its holding in Industrial Heat. The reduction reflects a reassessment of the current progress of the business and the trust's board said it is expected to reduce its net asset value by approximately 3.4p a share. Industrial Heat was one of the trust’s 10 largest holdings at the end of June and one of LF Woodford Equity Income's larger holdings.
