Contagion risk lifts from Woodford Income Focus


The threat of contagion spreading from the suspended Woodford Equity Income Fund (WEIF) to Woodford Income Focus, its smaller sister, may be receding as the pace of investor withdrawals decreases.

The suspension of trading in the £3.5 billion Woodford Equity Income fund on 3 June caused some panic among investors in Income Plus, who pulled £164 million from the fund, helping to shrink its assets to £287 million today, down from £480 million.

However, the rate of redemptions has fallen sharply to £9 million so far in July, according to data from Morningstar. This is slightly more than the daily average of £8 million withdrawn from Woodford Income Focus in June.

The most pulled from Income Plus on any single day was on 5 June, when almost £30 million was redeemed. 

In that first week £69 million flew out of the fund but just £7 million was cashed in during the final week of June. This downward trend continued into July with £4 million withdrawn in the first week, £3 million in the second and £2 million the following week, with just £204,000 pulled yesterday. 

‘The Woodford Income Focus fund is a different portfolio from Woodford Equity Income Fund,’ said a Woodford spokesman. ‘It doesn’t have any exposure to illiquid or unquoted securities and consequently isn’t exposed to the same issues as WEIF. 

‘The fund was set up with the aim to deliver an income of 5p per share per annum, which it has achieved. It mainly invests in companies that pay a dividend and, ever since launch, the portfolio has contained a combination of large, mid and small sized companies.’

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Broker Hargreaves Lansdown led the charge from Woodford Income Focus, dropping the fund from its £558 million HL Multi-Manager High Income portfolio. 

Although the two-year-old Income Plus fund has a different portfolio to WEIF its recent performance has been slightly worse. Over one year to the end of June it sat at the bottom of 110 funds in the UK Equity Income sector on a 24.2% loss. The Equity Income fund was just above it in 109th place after a 21.3% decline.

 



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