Any IFAs planning an early holiday will have had their plans thwarted with the news that high profile fund manager Neil Woodford has had to suspend his star fund.
Investors cannot make any further withdrawals from the Woodford Equity Income fund for 30 days. It was reported that £560m had been taken out over the past four months and that a request by Kent County Council to take out a further chunk (some £250m) led to the suspension. The fund had to take steps to protect itself,
At the top of the curve, the fund had over £10bn of assets, including many local authority pension funds. Now it’s reckoned that the figure is nearer £3.7bn.
Okay, this might be a case of a modern day Icarus and Neil Woodford has his fair share of detractors and supporters, but this is a shock to the system that we could all do without.
Some £3bn will now be in play and IFAs and wealth managers will be scrabbling to see where it can be placed, once it’s out of the fund of course. It’s going to be a worrying 30 days for many and making ‘enforced’ decisions for clients because one door has dramatically has swung shut is never a good idea.
And it’s not only Woodford and his team who are standing in the firing line. As the say, when the brown stuff hits the fan, the spray is felt far and wide and questions will be asked around the industry as to why the fall from grace has been so traumatic.
And have we again fallen foul of the star fund manager idea, as if an industry stock-picker can continually defy gravity over many years?
One early casualty of the affair is Hargreaves Lansdown, who saw its stock drop by nearly 6% as calculations were made over the broker’s exposure to the fallout. It’s reckoned the firm had a stake worth £1.4bn in the fund at the end of last year.
The Stock Exchange is a pretty unforgiving place, so if this turns out the way many are predicting and HL is left with egg on its face, then expect some senior executives to be spending more time with their families.
One thing is for sure, the waves from this incident are going to crash onto many beaches and the debris left could be hard to clean up.