Stopped people exiting his main fund…

https://www.ft.com/content/ee03cb4a-8627-11e9-97ea-05ac2431f453

The fate of one of Britain’s best-known fund managers lay in the hands of a group of local government officials and retired council workers in the county town of Maidstone.

On Friday morning, members of the Kent County Council pension fund committee met at the Grade II-listed Sessions House to discuss the scheme’s investment portfolio. On the agenda was the future of a £250m investment mandate entrusted to Neil Woodford’s investment business.

The pension fund had worked with Mr Woodford since 2007, but had seen its investment in his £3.7bn Equity Income fund suffer in recent years. Last November, the committee had invited Mr Woodford in to explain his outlook and views on Brexit. But four months later its performance remained disappointing and the investment committee put the mandate under review.

On Friday they decided they had had enough and wanted to end the relationship.

The decision triggered a series of events that could signal the end for Mr Woodford, who made his name at Invesco. He became one of the most successful and well-followed investment managers before setting up his own business in 2014.

Gating an open-ended fund is extraordinarily rare. I’m struggling to recall the last time this happened for a fund investing mainly in listed equities

On hearing that up to 7 per cent of the Equity Income fund was being withdrawn, Mr Woodford and his fellow executives decided to suspend trading in the fund on Monday, blocking further investor withdrawals until further notice.

Such measures are extreme by fund managers and the reputational damage can be serious and long-lasting. Last year GAM, the Swiss fund manager, threw up redemption gates on a series of absolute-return bond funds, which it was later forced to close as investors demanded their money back.

Several UK property funds made similar moves following the Brexit referendum three years ago.

“Gating an open-ended fund is extraordinarily rare,” said a fund manager who has known Mr Woodford for more than two decades. “I’m struggling to recall the last time this happened for a fund investing mainly in listed equities.

“This comes with huge reputational risk since investors expect open-ended funds to be just that.”

I sold all mine a few years back, worst performing fund in my portfolio…

I’m sure he’ll just get a job as “project manager” at SICK!.

By all accounts what he has done is suicide. So why has he done it? For his own protection? For the protection of remaining investors? Bit of both or just the former? I know when he first created the company, his fee structure was very high horse.

So why has he done it?

Because he has unlisted stocks in his main fund, he can’t just sell them down every time a redemption comes in. Plus there are rules covering the percentage of unlisted funds, so he has to freeze the fund to buy time to sell the unlisted stocks and rebalance the fund. If he just held listed funds it wouldn’t be an issue.

It’s much more common in property funds where the underlying assets are illiquid.

Although the root cause is the fund has performed very badly, so the withdrawals are coming in in floods, forcing him to sell all the listed stocks at a rate of knots which raises the percentage of unlisted stocks far higher than he had ever planned…

He has picked some right duds, e.g. the latest panic is Keir (fallen 40% on profit warning)…

I love the fact he has a massive holding in Kier, it highlights his incompetence beautifully.

Blindly trust fund managers at your peril.

Glad I got out and changed to Fundsmith last year.

I expect once HL delist him from their Top 50 funds, he will tail spin into obscurity. Although his closed fund Patient Capital will continue as you can’t pull out of that…

From Hero to Zero in five years….

Took a massive bet on a dud big pharma trial too recently, I see. When it smells of desperation, the investors can sense it.

Fund manager = gambler using other people’s money.

Took a massive bet on a dud big pharma trial too recently,

Althuogh to be fair, that is pharma and drug trials in a nutshell, a new cancer drug can be a billion dollar gamble, with a binomial outcome…

I wonder why he went down the route of Inc unlisted companies? I’m guessing his prev fund at IP was more aligned with what Fundsmith and LT are doing.

I’ve a few percent of my pension pot invested in that Fund…

I really should diversify out of equities a bit – anyone recommend a cheap gilt/bond tracker?

I think what’s most interesting about this is that it lifts the veil on what we think is liquid – I’m strictly passive, but if something equally bad went down at Vanguard I don’t doubt there would be a similar mechanism of preventing me withdrawing my money…

Panic over…

This has been in the pipeline for 2-3yrs, and was well signposted by some investment journos. I was invested with him before he went out on his own about 5yrs ago, went along with him when he did and it all went well initially. But then he started buying in to some really hairy stuff and I ran: NWBO (fraud run by a former Enron exec) and Industrial Heat (fraud based around cold fusion) are two of the most egregious examples, but the list is now incredibly long and particularly undistinguished. Good luck to anyone unfortunate enough to still be in, but expect worse to come.

I copied some of his income holdings. Cannot believe his bad luck, e.g., imperial brands tanking at the same time as the prov, nothing to do with each other. Imperial should recover but time is not on his side.

In fact, imperial dropped as he sold his share down.

I had some money in his fund until just over a year ago, It initially was doing well, but then it started to lose value and the losses just kept on coming, I got fed up of him costing me money , so pulled it all out.

A lucky escape it would seem.

I copied some of his income holdings. Cannot believe his bad luck

It’s not luck. He made a big noise about not paying for research and “bringing it in-house”. As the saying nearly goes: if you think research is expensive, try ignorance.

I think what’s most interesting about this is that it lifts the veil on what we think is liquid – I’m strictly passive, but if something equally bad went down at Vanguard I don’t doubt there would be a similar mechanism of preventing me withdrawing my money…

His illiquid stocks and the associated problems have been all over the Sunday Business sections for months now, so there was plenty of warning (but only if you read the papers). With Vanguard trackers, it’s 100% liquid traded stocks, so wouldn’t happen.

As for research I’m not sure they’d have known that Provident was going to decide to commit suicide by effectively firing all it’s Agents who had the relationships with all their clients and then suddenly finding itself client-less overnight! A most bizarre business decision. I don’t think anyone say that coming; although couldn’t happen to a nicer bunch of loan sharks…

He made a big noise about not paying for research and “bringing it in-house”

Many fund managers have done much the same since the change in regulations.

He was always invested in unquoted stocks, I seem to recollect his old fund had a bit of a clearout when he left. He had a reputation as a bit of an operator.

Phew, had money in an isa with him, just moved it a few weeks ago, still got a hundred quid in it or so!

The problem with Provident wasn’t the suicidal actions of the management, because that was trailed in advance and anyone paying attention could have sold before it inevitably blew up. It was that Woodford ended up owning about a quarter of the company, a stake so large that he couldn’t sell it without tanking the share price. So what did he do? He bought more! He’s done this time and again with different stocks, and it’s as much a cause of his liquidity problems as the unquoted dogs that are in there. As his own boss he appears to operate without the kind of risk controls to which he’d have had to adhere at his former employer.

Sold mine last August.Came out of it with a small profit.Didn’t know the ins and outs of the fund but did see the poor performance.

Not that I’ve got the money or nous to play with investments but what will happen to the fund now? Will they be actively trying to save it and the people’s life savings or will they not give a fig as he sure won’t be worrying about his future.

Sold anything I had with his name on a few years ago as it became obvious he had the kiss of death.

Not that I’ve got the money or nous to play with investments but what will happen to the fund now? Will they be actively trying to save it and the people’s life savings or will they not give a fig as he sure won’t be worrying about his future.

They will be raising capital across the portfolio to satisfy the £250m block redemption that caused the lock and, assuming they have any sense, sufficient to try and guesstimate the redemptions that flood in from panic selling when they open the doors again. Finding buyers at a decent price for the unquoted element could prove difficult and the more aggressive smaller hedge strategies will be playing games with his listed book which will compound the issue. That said when redemptions calm and the shorts pull out you could get quite a bounce in the listed element of the fund, be it through the fund or directly. People’s life savings aren’t going to go up in smoke, the fund value is based on the underlying company values. He set his stall out some time ago and in hindsight it was the wrong decision, he’s not the first to make a bad call nor will he be the last, but it seems arrogance on his part has exacerbated the situation.

Latest update from fund…

What is a fund suspension?

When a fund is suspended, requests from investors to buy, sell or transfer shares will not be accepted. However the fund manager can continue to actively manage the portfolio on behalf of investors as normal.
Why have you decided to suspend the fund?

Link Fund Solutions (Link), as ACD for the fund, has made the decision following an increased level of redemptions. The move is designed to protect the investors in the fund by allowing Neil time to reposition the element of the fund’s portfolio invested in unquoted and less liquid stocks, into more liquid investments.
How long will the fund be suspended for?

Link will monitor the situation on a daily basis to consider whether the exceptional circumstances that gave rise to the suspension of dealing have changed. The suspension will be lifted as soon as is practicable after these exceptional circumstances have ceased.

In accordance with the Fund’s Prospectus, Link and the Depository will formally review the suspension at least every 28 days and will inform the FCA of the review and any change to the information given to Shareholders.

We will keep investors updated in relation to the suspension, including its likely duration.
Will I get my money back?

The fund has been suspended temporarily. Investors will be able to access their investments once the suspension is lifted. When this happens your investment value will be dependent on the share prices of the portfolio’s underlying holdings at that time.

Important note: In the event the share price of those stocks has risen, your investment will be worth more than it is today. If the value of those underlying assets has fallen, your investment will do too.
Will I still be able to purchase/sell shares if I have a regular payment/redemption set up?

No, investors who have a direct debit set up to automatically invest in the fund every month will not have their investment processed this month. Investors will be able to purchase or sell shares again once the temporary fund suspension is lifted.

Investors should check with their platform or IFA on their individual circumstances, but we understand that most investors will have their money collected as usual and held in cash.
Is the fund still going to price daily?

We will be publishing price data for information purposes, during the period in which investor trading in the fund is suspended.

The last price at which the fund traded was as at midday Friday, 31 May 2019. Any orders placed after that dealing cut-off point have been rejected. All affected investors have been informed accordingly. When the suspension is lifted, investors will be required to resubmit their dealing instructions.
Will deals received prior to the dealing cut off point on Friday 31 May be settled as normal?

Yes.
Will any exceptions be considered? For example, following death or for a transfer between platforms?

No exceptions are envisaged at this stage, but if the situation changes, we will let you know. Transfers in or out of the fund are suspended, including instructions to transfer between share classes. Transfers that do not change the beneficial ownership of a holding are possible – for example, within a platform nominee account or a switch between platforms where the same investor remains invested in the fund in the same share class.
Is Neil a forced seller?

No. While investor trading in the fund is suspended, Neil has the time and space to deliver on his strategy to place the unquoted parts of the portfolio with interested buyers.
Will you be building a cash position in the fund ready to meet redemptions when the suspension is lifted?

We cannot comment on specific future trading intentions on the portfolio for regulatory reasons, other than to reiterate that the suspension is intended to protect the investors in the fund by allowing Neil, 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.

As such, this represents management of the portfolio, rather than a liquidation of the portfolio.
What future communications can investors expect to receive regarding the suspension and how frequently will these be issued?

We will update you as regularly as possible and as soon as additional information is available. An investor letter was issued by Link on Tuesday 4 June, a copy of which can also be found on their website. Future updates will be provided on our website and on Link’s.

Fund suspension update from Neil

SJP has just sacked him on the spot

And this is a lie:

Is Neil a forced seller?

No. While investor trading in the fund is suspended, Neil has the time and space to deliver on his strategy to place the unquoted parts of the portfolio with interested buyers.

Easy to be wise after the event but the performance of his fund has been dire for years. Why was anybody invested in it with so many other options, at least he did very well out of it which is the main thing.

Why was anybody invested in it with so many other options

1) His previous reputation
2) HL and the like promoted him like crazy as a ‘no brainer’; and were right up to his redemption freeze

My local Rightmove search area has been bringing up loads of investment opportunities in Newhaven. Someone is looking to shift some illiquid assets, must be 15 or 20 properties that have appeared in the last couple of days whereas they are few and far between.

When it rains it pours….

Woodford owns 23% of Stobbart, who have just suspended trading…

https://www.theguardian.com/business/2019/aug/23/eddie-stobart-suspends-trading-shares-accounting-error

A couple of companies are now looking to take action against Hargreaves Lansdown for punting Woodford’s fund when they knew it had some dodgy holdings. I’ve just registered with Leigh Day although Slater & Gordon are also looking at this and it will probably be a no win, no fee arrangement if and when it happens.

Thanks. Having lost a years worth of contributions (30% of my investment in Woodford) already I would welcome a result, although not very hopeful “the value of your investments can go up as well as down”