Major investors in Neil Woodford’s suspended fund were given no prior warning that they would be banned from withdrawing their cash, according to one investor.
Kent County Council, which attempted to withdraw £263 million invested in the fund manager’s flagship Woodford Equity Income Fund on Monday, said it asked the company for its cash on Monday but within hours bosses suspended all withdrawals.
A council spokesman said: “KCC is disappointed that, as a major investor in the fund, we did not receive this prior notification.”
The council said it had initially planned to hold an internal meeting later this month to discuss the poor performance of the fund, but, with investors cashing out in ever-greater numbers, the council decided to act on Monday.
A call was placed to the fund and shortly afterwards all investors were blocked from withdrawing their money. It is not known how long the ban will remain in place, although sources suggest it will be at least four weeks.
In a statement, the council said: “Kent County Council’s investment with Woodford initially performed reasonably well, reaching a peak value in January 2017 of £317 million.
“Since then, performance has deteriorated and, in March 2019, the authority’s Superannuation Fund Committee resolved to reconsider the investment at its meeting on 21st June.
“The committee had an intervening meeting scheduled for 31st May to receive an update on the pension fund investment strategy, although there was no intention to bring forward the review of Woodford investment.
“However, leading up to this meeting, the overall value of the Equity Fund (KCC and other investors holdings) had reduced by a further £560 million due to redemptions and further weak performance.”
The council insisted Mr Woodford’s decision would not affect services or cash reserves. Kent Council has a £6.4 billion pension pot and the amount invested in Woodford Equity makes up 4%.
Managers made the first investment of £200 million in 2014 and a further £60 million in 2016, the council added.
KCC said it was “committed to seeking the best outcome and could still seek a managed redemption in order to maximise the benefits for the pension fund”.
Redemptions from the fund were reported to have hit an average of £10 million a day.
On Monday, Woodford Investment Management said: “After consideration of all relevant circumstances relating to the fund’s assets, we have 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.
“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, into more liquid investments.”