Woodford Income Focus – how Equity Income wind up may impact investors

Link Asset Services has taken the decision not to re-open the Woodford Equity Income Fund. This means that the investments will be sold, and the resulting cash returned to investors.

Investors in Woodford Equity Income are currently unable to buy and sell units in the Fund.

Its sister fund, Woodford Income Focus, remains open and investors are able to trade the fund as usual. Unlike the Equity Income Fund, Income Focus is invested entirely in listed stocks, but this does not guarantee protection from liquidity concerns.

Link has released a statement today explaining that after “careful consideration”, they, as the Woodford Equity Income Fund’s Authorised Corporate Director, had taken the decision to “wind it (Woodford Equity Income) up as soon as practicable”.

The decision to wind up the Equity Income Fund may well cause volatility in the price of its underlying holdings. As there is an overlap between the portfolios of the Equity Income Fund and the Woodford Income Focus Fund, investors in the Income Focus Fund may, as a result, see the value of their investment impacted.

If this uncertainty leads to investors redeeming assets in the Income Focus Fund, this could also cause volatility. The fund manager would likely be required to sell positions from across the portfolio in order to keep the integrity of the fund and to seek to ensure there is sufficient liquidity to meet future redemptions. If this is not possible, liquidity may be impacted and investors may not be able to continue to buy and sell units.

Asset manager risk

Woodford Investment Management is no longer the Woodford Equity Income Fund’s manager, effective immediately, and the fund is being renamed. Woodford Investment Management will therefore no longer be earning a management fee on this Fund. It also does not currently charge a fee for the Woodford Patient Capital Trust, as the closed-ended fund has a performance fee which has not been triggered.

We have questions about the viability of the Woodford Investment Management business going forward if it is only drawing an income from the Woodford Income Focus Fund.

See our full update on Woodford Equity Income

Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice.