LF Woodford Equity Income to be suspended until December

Since the fund was suspended from trading on 3 June Link reviews whether to reopen it at least every 28 days. In its update on it second review on 29 July, Link said:

“We anticipate that the suspension of dealing is likely to last until early December while we implement the strategy to re-position the portfolio in order for the fund to be re-opened at that time, which is conditional upon achieving the target fund profile. This is a realistic amount of time for Woodford Investment Management to complete a measured and orderly re-positioning of the fund's portfolio of assets ensuring that there is adequate liquidity whilst preserving or realising the value of the assets. Importantly, [this will] allow all investors to choose whether they wish to remain invested in or to withdraw their investments from the fund. The work that is underway to reposition the portfolio is designed to ensure that there are liquid assets available for these purposes, while continuing with the objectives and investment strategy of the fund.”

Link also said that Woodford Investment Management had made progress in assessing the portfolio and making sales where reasonable prices could be achieved, and added: “We have carefully considered Woodford Investment Management’s proposals in relation to the assets including consulting with specialist professional advisers so that we can be sure decisions are taken in the best interests of investors. We will continue to monitor progress of the repositioning of the fund’s portfolio to ensure that it is on track and our aim of lifting the suspension in December remains achievable.”

Woodford Investment Management said that during the closed period it is selling assets in a timely and orderly way through a variety of processes across a broad buyer base to ensure the best price can be obtained for the assets. The company said that Neil Woodford and his team have made progress in selling parts of the less liquid quoted exposure from the portfolio and that when the fund reopens its holdings will be much more liquid, and most will be FTSE 100 and FTSE 250 companies.

"80 per cent of the proceeds from share sales since suspension have been reinvested in FTSE 100 companies, but still reflecting the same investment strategy," said Mr Woodford. "That strategy is founded on a belief that the global economic environment is not as robust as equity markets are implying. Profit warnings have been a regular feature of the second quarter earnings season that recently commenced, and we would expect to see more of these, particularly from global-facing and industrial companies.

"We will continue to focus the fund’s portfolio towards the few areas of the market which continue to offer valuation appeal and to the economic regions that appear to have enough internal momentum to withstand the growing global headwinds. This results in a meaningful exposure to domestically-focused businesses which I believe, even among the FTSE 100 and FTSE 250 constituents, represent the most attractively valued stocks in the investment universe.

"Admittedly, this strategy has not delivered the returns we had anticipated over the past couple of years which is why the fund is in the situation it is today. The suspension itself did appear to have had a further immediate impact on performance in the short term, but we are of the view that the worst is now past. The suspension and the circumstances that led to it, may have had an impact on the price of some of the fund’s assets, but they have not had an impact on the value of those assets."

But Ryan Hughes, head of active portfolios at broker AJ Bell, said: “The fact that Link Asset Services and Woodford Investment Management have given a timeframe suggests they have some confidence in the fund re-opening in December, but this will still mark six months of fund suspension that investors have had to navigate. And, unfortunately, the performance figures don’t provide much of a boon for investors, with the fund down 3.3 per cent since it closed on 3 June, compared to the FTSE All Share index’s return of 5.3 per cent during that time. The past month has seen the fund rise by almost 1 per cent while the market had risen 1.8 per cent.”

A suspension of up to six months would be similar to the period of time commercial property funds were suspended in 2008 during the financial crisis and in 2016 after the UK’s vote to leave the European Union. In the latter case, many of the suspended funds re-opened in a far shorter timeframe. For example, M&G Property Portfolio (GB00B89X8P64) was suspended from trading between 5 July and 4 November 2016, and Janus Henderson UK Property (GB00BP46GG64) was suspended from trading between 6 July and 30 September 2016.