Some of you may have seen in the news the trouble that Neil Woodford has been in with the suspension of his flagship fund – the Woodford Equity Income Fund.

In respect of investments we manage on behalf of our clients, we do not believe any of our clients have been caught by the suspension of the Woodford fund.

Fund suspensions are very unusual occurrences, but they do happen.  The last time we had a significant fund suspension was following the Brexit referendum that resulted in a vote to leave the EU, when there was an exodus of investments from property funds and those property funds were suspended for a period of up to 6 months.

Whilst very rare, fund suspensions are allowed to enable the manager time to sell stock should there be a high demand from investors to sell their investments.  This is particularly important when a fund holds less liquid stocks, such as unquoted equities or commercial property.

In the case of Woodford, our clients made great returns with him whilst he worked at Invesco Perpetual and we thank him for that.  When he set up his new company, unlike many firms, we were cautious about investing with such a small company and only made small investments on behalf of some clients.  In April 2016 I became concerned about the number of small and non-income producing holdings he had in his Equity Income Fund.  This did not seem to match the funds objective, and we sold out of it from our Growth and Income Portfolio.  Over time we have sold all remaining client holdings.

We have monitored the situation closely over the last three years and are pleased with the decisions we made but were surprised how some large Financial Institutions continued to recommend the fund.  We believe this is unlikely to happen with any of the funds we invest in, but we cannot guarantee this, which is one reason we like to diversify client portfolios.  Whilst this news is not good publicity for the industry, it does illustrate the value of regular reviews by an experienced adviser.

David Stephenson, Investment Manager