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Woodford's woes compounded by double whammy of bad news for once feted investor

News Team, 30/07/2019

Woodford Equity Income Fund (WEIF) will remain suspended until at least December, with both holdings and customer withdrawals paused for the next three months.

Link Asset Services (Link), the management service representing WEIF, said in a statement to investors that “the best option in the interests of all investors is for the suspension of dealings to continue”.

Commenting on the future viability of the fund, 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, and which is conditional upon achieving the target fund profile. In our view, this is a realistic amount of time for Woodford to complete a measured and orderly re-positioning of the fund's portfolio of assets ensuring that there is adequate liquidity while preserving or realising the value of the assets."

This news was released on the same day that the board of Woodford Patient Capital Trust (WPCT) revealed to the market it was considering "all options" regarding the management of the closed-ended fund.

In an RNS statement, the board emphasised the importance it placed on  "preserving the value of WPCT's portfolio and protecting the interests of shareholders in WPCT". It revealed the difficulties Woodford Investment Management Limited (Woodford) continued to face, including the state of its current borrowings.

In the company update, it said : “These are currently measured at £117.4 million, equating to a gearing position of 15.95 per cent of Net Asset Value.”

In order protect the portfolio and assess the funding requirements of its investee businesses and to reduce borrowing, the board has been "closely monitoring" the situation at Woodford. Evidence of a rift between the board and the management can be seen in the company update, which reveals that the board has "held preliminary discussions with select management groups that have approached the company regarding the ongoing management of WPCT.”

Assessing Woodford’s management situation, it said: “Whilst the board remains confident in Woodford’s commitment to WPCT and the current day-to-day management of the portfolio, the board intends to engage with a broader range of third-party managers in order to undertake a full assessment of all potential management options, which may or may not lead to a change in the Company's management arrangements.

Ryan Hughes, head of active portfolios at AJ Bell believed that the latest statements from the board highlight the differences of opinion between Woodford and its board.

He said: “The latest comments from the Patient Capital investment trust board will give further pause for investors in Woodford’s funds, and show a hint at the potential tension between the board and Woodford.”

Nevertheless, Mr Hughes believed investors would be relieved to have clarity on the situation, even if serious problems remained at Woodford.

Assessing its plans for the next three months, he said: “This announcement at last gives a timeframe for investors in WEIF, with Link saying that the fund suspension is likely to last until early December. This gives much-needed clarity for investors but they are likely to remain concerned. The fact that Link and Woodford 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,”

Mr Hughes also offered a gloomy assessment of fund’s performance since suspension, suggesting this would worry investors and suggested the situation could remain difficult.

He said: “Unfortunately the performance figures don’t provide much of a boon for investors, with the fund down 3.3 percent since it closed in June 3, compared to the FTSE All Share return of 5.3 percent during that time. The past month has seen the fund rise by almost 1 percent while the market had risen 1.8 percent.”

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