Kent council prevented from withdrawing equity fund investment

4 Jun 19

An equity fund, which has been haemorrhaging clients, has barred a county council from accessing its “deteriorating” investment.

Woodford Equity Income Fund told Kent County Council yesterday it could not withdraw its £263m investment to “protect investors”.

A council committee unanimously agreed to withdraw its long-standing investment on Friday last week but when it came to do so yesterday the firm announced that it had stopped trading.

A council spokesperson said: “The announcement on Monday that trading in the investment fund was suspended was not anticipated. KCC is disappointed that, as a major investor in the fund, we did not receive this prior notification.

“We do not know whether the decision to suspend trading was linked to the council’s decision to redeem.”

PF understands the local authority was the only council that had invested in the equity fund and was one of its largest investors.

The equity fund, headed by one of Britain’s leading fund managers Neil Woodford, has shed value in recent months falling from £10bn at the end of December (as per the firm’s website) to £3.7bn today according to financial services firm Morningstar.

The fund has lost £560m in assets in a matter of weeks, according to Morningstar.

Ryan Hughes, head of active portfolios at investment platform AJ Bell, said: “The news that the Woodford Equity Income Fund has suspended dealing will come as a shock to many people but it shows the sheer scale of redemptions the fund has been suffering in recent months.”

Kent stressed that the investment represents around 4% of the council’s total investment of £6.4bn from its pension fund and said that its value has increased 47% since 2014.

“KCC’s investment with Woodford initially performed reasonably well, reaching a peak value in January 2017 of £317m. Since then, performance has deteriorated,” the council said.

A statement from Woodford said that it had taken the decision to “suspend dealing in shares in the fund, with immediate effect and until further notice”.

It added: “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.”

The suspension is allowed through Financial Conduct Authority regulations, which are in place to prevent market fluctuations causing redemptions at an extreme rate.

Kent said it would still seek “managed redemption” of the investment to maximise the benefits for the pension fund.

Woodford has also invested heavily in construction company Kier Group, which issued a profit warning yesterday and saw its shares slump by 40%.

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