The City stock-picker Neil Woodford has experienced another blow after a decision to block investors from pulling cash from his flagship fund caused share prices to fall in his listed fund and a number of other companies where he is a key investor or which sell his funds.
Woodford’s Patient Capital Trust Fund, which is listed on London’s FTSE 250 index, tumbled as much as 20% in early trading before closing 7.2% lower at 71p a share.
The investment group Hargreaves Lansdown, whose clients last year accounted for more than 30% of Woodford’s now blocked Equity Income Fund, was the second biggest faller in the FTSE-100, down 4.6% at 2,126p.
Among companies in which Woodford is a big investor, NewRiver REIT, a property investment business, was down 4.9% and the Stobart Group infrastructure firm was down 4.3%.
Investors were spooked by news on Monday that Britain’s best-known fund manager had gated his Equity Income Fund, barring thousands of investors from pulling out their cash, for at least 28 days. Investors are believed to be still liable for fees of up to 1.7% despite the suspension.
Woodford was forced to temporarily close the fund after a steady flow of investors pulling out cash turned into a flood. Withdrawals topped £187m in May alone.
Those redemptions contributed to a total £600m decline in the value of the fund last month; it shrank in size to £3.7bn, compared with a peak of £10.2bn in May 2017.
A request by Kent county council to pull more than £263m from the fund on Friday is believed to have prompted the ban on redemptions.
The local authority said there was a unanimous vote of its pension committee to redeem its investment last week after news of the fund’s dramatic drop in value. But the sudden suspension blocked the council from withdrawing the funds, which account for about 4% of its £6.4bn pension fund investments.
The council said the suspension announcement was unexpected. “Kent county council is disappointed that, as a major investor in the fund, we did not receive this prior notification,” it said.
The Pensions and Lifetime Savings Association urged the City regulator to step in. It represents local government and workplace pension schemes, some of which are also Woodford clients, including Kent county council.
“The concern now is that pressure builds and matters escalate further or uncontrollably – which would not be helpful for anyone,” a spokesperson for the association said. “To avoid this it’s important that clarity for investors is forthcoming as soon as possible and, should it be required, regulators step in to ensure their interests – and the interests of the thousands of pensions scheme members – are protected.”
The Financial Conduct Authority said it was aware of the suspension and was in contact with the firm, but declined to comment further.
Woodford has been stung by his optimism about smaller domestic stocks, which have underperformed since the Brexit vote, prompting investors to pull their cash. He has also backed a number of unquoted investments, which can be difficult to turn into cash when investors decide to redeem.
Woodford paid himself and his business partner Craig Newman nearly £37m in the 2017-18 financial year.
The investor exodus is an embarrassment for Woodford as he marks the five-year anniversary of the launch of his eponymous fund. He built his reputation over 26 years at Invesco Perpetual where he controlled assets worth £33bn.
The City regulator fined his former employer £18.6m in 2014 for exposing investors to too much risk. Invesco Perpetual confirmed that funds run by Woodford were among those that had breached investment limits between 2008 and 2012.
Hargreaves Lansdown has removed both the suspended Equity Income Fund and the Income Focus Fund from its Wealth 50 list of favourite funds. The latter is still open for redemptions and Woodford’s Patient Capital Trust is still trading.
Emma Wall, the head of investment analysis at Hargreaves Lansdown, said the Patient Capital Trust had clearly been affected by the “negative sentiment around the suspension” of his flagship fund but the underlying value of patient capital had not changed.
“There are other factors at play which make UK companies not that attractive at present,” she said, pointing in particular to political uncertainty.
Woodford did not respond to requests for comment.
