Kent’s role in Woodford fund trading suspension unclear
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A major equity fund suspended trading on Monday after Kent Pension Fund decided to withdraw its £263m investment.
Kent’s superannuation fund committee voted on Friday morning to withdraw from the Woodford Equity Income Fund fund with immediate effect, due to a drop in value caused by redemptions by other investors and weak performance.
However, Kent’s move was thwarted on Monday when the investment fund announced that it was suspending trading in the account for up to 28 days.
In a statement, the council said: “We do not know whether the decision to suspend trading was linked to the council’s decision to redeem.
“The council is committed to seeking the best outcome and could still seek a managed redemption in order to maximise the benefits for the pension fund.”
Kent County Council’s pension fund holds an investment of £263m in the Woodford Equity Income Fund, which was made in two tranches – £200m in 2014 and a further £60m in 2016.
This represents around 4% of the council’s total investments of £6.4bn within its pension fund.
In a statement, the council said that its investment with Woodford, had initially performed reasonably well, reaching a value of £317m in January 2017.
However, the performance has deteriorated, and the committee had resolved to discuss the allocation at its June meeting.
However, due to a further drop in the Woodford fund of £560m, the committee decided to act.
The committee resolved unanimously that the council should seek to redeem the investment with immediate effect.
However, on Monday, before the council was able to implement the decision, a statement from Woodford said: “Following an increased level of redemptions, this period of suspension is intended to protect the investors in the fund by allowing Woodford, as previously communicated to investors, time to reposition the element of the fund’s portfolio invested in unquoted and less liquid stocks, in to more liquid investments.”
Dealing in the fund was suspended by Link Fund Solutions, the fund’s authorised corporate director, to protect existing investors.
Woodford said it would keep investors informed about the suspension, including its likely duration.
Kent’s statement said: “The announcement on Monday that trading in the investment fund was suspended was not anticipated.
“Kent County Council is disappointed that, as a major investor in the fund, we did not receive this prior notification.”
Hargreaves Lansdown, a fund platform which previously promoted the Woodford fund, has now removed it from its Wealth 50 list of recommended funds.
In a statement, Hargreaves Lansdown said: “The fund has fallen in size over the last year, due to poor performance and investor outflows. The fund size is currently £3.7bn, down from £6.8bn a year ago.
“A significant reduction in fund size jeopardises manager Neil Woodford’s ability to run the fund effectively.”
Link will review the fund after 28 days and report to the regulator, after which the suspension will be lifted or renewed.
Investors who have a direct debit set up to automatically invest in Woodford Equity Income every month will have future payments held in cash until the issue is resolved.
Speaking on Radio 4’s World at One programme, former pensions minister Ros Altmann called for an investigation into the way the fund was sold and promoted.
She said a probe should make sure” there haven’t been untoward risks taken in the fund, which would have meant that there was too big a risk to investors in the fund than they had been told about.”
