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Investors still stranded as Woodford's £3.7bn fund stays frozen

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Fund manager Neil Woodford. Photo: YouTube/Woodford Investment Management.

Investors are still unable to access £3.7 billion invested with high-profile fund manager Neil Woodford, after a review of his stricken flagship fund concluded it was not in a fit state to reopen.

Link Asset Services, which administers the Woodford Equity Income Fund, said on Monday that it had decided to keep the fund gated after a review of its liquidity position.

Karl Midl, a director of Link Fund Solutions, said the company “concluded that it remains in the best interests of all investors in the Fund to continue the suspension.” The firm will “continue to monitor the situation on a daily basis,” as well as conducting a formal review every 28 days.

READ MORE: Star fund manager Neil Woodford 'sailed close to the wind'

The decision means investors will now likely have to endure several more weeks of being unable to access their money.

Withdrawals from the Woodford Equity Income Fund were suspended on June 3 after it suffered a liquidity crunch. Kent County Council tried to withdraw just over £260m from the fund but Woodford did not have enough cash on hand or liquid assets to meet the redemption. Link decided to suspend withdrawals from the fund to stop investors losing out from a fire sale of assets.

The suspension has caused embarrassment for one of Britain’s most high-profile money managers, provoked anger from investors, and raised serious questions about Woodford’s investment practices.

READ MOREL Shake-up at money manager Neil Woodford's business after fund freeze

Woodford ran into trouble after investing a high-proportion of the fund into illiquid assets, such as the stock of private businesses. It meant he could potentially struggle to offer the daily liquidity promised by the fund. Bank of England governor Mark Carney last week said funds like this were “built on a lie.”

Woodford Investment Management said on Monday it was “working around the clock to ensure the situation is resolved in everyone’s best interests as quickly as possible.”

The company said it was making “positive progress” selling its illiquid holdings. Woodford has sold off £459m of assets since the fund was suspended, according to Citywire.

Woodford said it is close to appointing a firm to help it sell other investments. Last week Sky reported Woodford was close to appointing PTJ Park Hill.

READ MORE: Funds like Woodford 'built on a lie' and 'fundamental questions' ignored

Neil Woodford was once viewed as one of Britain’s most successful money managers. He built a reputation for himself during a quarter century career at Invesco Perpetual, before going it alone under his own name in 2014.

His record has been mixed since solo and the freezing of his fund has dealt a serious blow to his reputation.

The Financial Conduct Authority has opened an inquiry into the episode and FCA CEO Andrew Bailey said last week that Woodford was “sailing close to the wind” prior to the suspension, as his fund had twice breaching liquidity rules in the run up to the freeze.

“We can assure you that we are striving to do all we can to bring further clarity to the situation as soon as possible,” Link’s Midl wrote in a letter to investors on Monday. “All decisions will continue to be taken in the best interests of investors.”

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Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.

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