Woodford Equity Income Fund
Following our initial correspondence in the wake of the Woodford Equity Income fund suspension here is an update to summarise the current position and the work we have undertaken.
Why did we invest in Woodford Equity Income fund?
We felt that the Woodford Equity Income Fund would provide the portfolios with some protection in the event of a Brexit deal.
Neil Woodford buys companies that he believes will have a greater value in the future and the Brexit uncertainties provided him with an opportunity. Brexit has seen very little overseas investment in the UK economy causing valuations of UK domestic orientated companies to fall – they are unloved. However, is the UK economy really in such bad shape to justify such low valuations, we would argue that probably not. The UK has record employment figures, the return of real wage growth, low interest rates, steady inflation and has continually had projections of economic growth. If the uncertainty of Brexit were to disappear one could easily expect investment into the UK economy to pick up and hence an improvement (possibly significant) in company valuations.
What has happened to my investment?
You have not lost all the money you invested into this fund.
The fund has been suspended – not by the FCA but the independent corporate director. The assets of the fund at point of suspension continue to be held. Woodford will be looking to sell some of these, buy replacements and build a cash position to allow sufficient liquidity for expected redemptions before the suspension is lifted. Some of the more illiquid assets may be devalued, but it is extremely unlikely they will have no value.
Your investments will still contain the Woodford fund, which will continue to be priced daily and pay its dividend. Any top ups or regular contributions made during the suspension that would have been invested into the fund will instead be held in cash until a replacement fund has been identified.
What are Rouse Limited doing?
Once the fund suspension is lifted (unfortunately I am unable to give a timescale for this) we will close your position in the fund unless we hear from you otherwise.
We are in discussion with Woodford and have informed them of our intention to exit the fund once the suspension is lifted. We will update you as and when progress in lifting the suspension is made.
Extra due diligence is being undertaken to reduce the risk of this happening with other funds you are invested in.
In response to this unprecedented situation we are reviewing our investment committee terms of reference, particularly fund exposure limits and liquidity.
What should I do if I would like further information?
We have placed a link to a copy of the FCA letter to Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee on LF Woodford Equity Income fund below. This letter was in response to concerns that the Treasury raised following the suspension of the fund and sets out in detail what has happened. We think that this letter is a clear and detailed explanation of what has happened and gives some guidance as to how the issue may be resolved.
Please do get in touch if with us if you have any further concerns.
We are sorry that you have been caught up in this development.
Investment Committee Chair
FCA response to the Woodford Equity Income fund suspensionDownload
For the FCA’s response to the Treasury following the suspension of the Woodford Equity Income fund please click here