The troubles of one of Britain’s best-known funds will force investors to think harder about how liquid their portfolios really are
county town, was a bastion of resistance during the Peasants’ Revolt of 1381. Six centuries later it is at the centre of another rebellion, which threatens to engulf one of Britain’s best-known investment groups. The Kent County Council pension fund, which holds the savings of government employees, had for months been frustrated by the poor performance of the £3.7bn Woodford Equity Income Funds custodians to suspend redemptions. Insiders expect a stampede once trading resumes.
But the fund morphed into something barely recognisable. Convinced that his peers were too pessimistic about Brexit, Mr Woodford swapped blue-chips for smaller, younger companies focused on the domestic market. From 40% in 2016, these accounted for 95% ofs listed stocks in March 2019. But some of his riskier investments, such as stakes in firms developing new drugs, soured.
Mr Woodford’s firm says closing the gate will give it the breathing space it needs to “reposition” the fund towards more liquid stocks, so as to meet redemption requests once it reopens. Observers are not optimistic. “Investors who have stayed are now trapped and we don’t know for how long,” notes Patrick Connolly of Chase de Vere, a financial adviser.
Investors may fume at Mr Woodford for his racy choice of stocks. But they cannot blame him for hiding the truth:s holdings were disclosed on its website all along. Instead they might ask why firms like Hargreaves Lansdown, Britain’s largest financial adviser, continued to recommenduntil very late. Pension trustees will also force investment committees to keep closer tabs on how liquid their portfolio is, expects Ryan Hughes of AJ Bell, an investment platform.
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