A message on the woodfordfunds.com website revealed the news today and was said to be a measure designed to “protect investors” amid “an increased level of redemptions”.
It said: “LF Woodford Equity Income Fund (a sub-fund of LF Woodford Investment Fund, an Investment Company with Variable Capital) (the “Fund”) Link Fund Solutions Limited (“LFS”) as the Authorised Corporate Director of the Fund, has today obtained the agreement of the Funds’ Depositary to suspend dealing in shares in the Fund, with immediate effect and until further notice.
“After consideration of all relevant circumstances relating to the Fund’s assets, we have, in conjunction with Woodford Investment Management Limited (“Woodford”), the appointed Investment Manager, come to the conclusion it is in the best interests of all investors in the Fund to suspend the issue, cancellation, sale, redemption and transfer of shares in the Fund.”
The statement added: “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.
“During the period that share dealing is suspended no requests to redeem, purchase or transfer shares in the Funds will be accepted.
“When LFS elects to resume dealing in the shares of the Fund, we will write to all investors informing them of this fact.
We will keep all investors appropriately informed about the suspension, including its likely duration.”
Reacting to the announcement, Ryan Hughes, head of active portfolios at AJ Bell, said: “The news that the Woodford Equity Income fund has suspended dealing will come as a shock to many people but it shows the sheer scale of redemptions the fund has been suffering in recent months with the fund falling to under £4bn from a high of over £10bn two years ago.
“With an element of the fund in illiquid investments, it is clear that the fund was having to sell the more liquid holdings to fund the redemptions, which in turn can exacerbate the problem.
“This is not a decision that will have been taken lightly and it is done to protect the interests of remaining investors.”
He added: “Woodford has indicated that they will be looking to reposition the portfolio away from illiquid holdings during the suspension and therefore investors may have to be patient for the fund to reopen.
“Events such as this are rare but it is a reminder to all of the risks that come with investing in illiquid assets while offering daily liquidity to investors.
“This never appears to be a problem when money is flooding in but when sentiment turns it can come back to bite investors badly as has happened here.”
Reaction to the news has been one of disappointment with Hargreaves Lansdown dropping the fund from its Wealth 50 fund list of favourite funds.
Emma Wall, head of investment analysis, Hargreaves Lansdown: “The suspension follows a period of underperformance and outflows for the Woodford Equity Income Fund. We are advocates of long-term investing and think Woodford’s multi-decade track record remains compelling – but we don’t underestimate the disappointment investors must feel with Woodford’s recent performance.
“Because the fund has been suspended we’ve removed it from our Wealth 50 list of favourite funds. We have also removed the Woodford Income Focus Fund, as we would prefer to see a resolution to the dealing suspension before we conduct a review.”