LONDON (Alliance News) - Kent County Council has hit back at fund manager Neil Woodford, saying it was unaware of the fund's decision to suspend redemptions from his equity funds on Monday.
Kent County Council, or KCC, is asking for GBP263 million of its pension fund currently invested in Woodford Equity Income Fund to be withdrawn, but may not be allowed to do so.
On Monday, Woodford suspended withdrawals from his equity income fund as the fund's underperformance resulted in significant outflow of investors.
In a statement on Monday, LF Woodford Equity Income Fund said: "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."
However, on Tuesday, KCC said the decision "was not anticipated".
"KCC is disappointed that, as a major investor in the fund, we did not receive this prior notification," the council added.
According to the Financial Times, the suspension in fund redemptions followed a steady stream of investor outflows, which was sparked by the council. The investor exodus has resulted in the fund shrinking to GBP3.7 billion from GBP10.2 billion in May 2017, the newspaper reported.
As at April 30, LF Woodford Equity Income Fund had GBP4.3 billion in assets.
The council continued: "We do not know whether the decision to suspend trading was linked to the council's decision to redeem. The council is committed to seeking the best outcome and could still seek a managed redemption in order to maximise the benefits for the pension fund."
The equity fund is managed by Woodford Investment Management Ltd, which also manages UK listed Woodford Patient Capital Trust PLC. Trading in Woodford Patient Capital Trust remains unaffected by the suspension.
Shares in Woodford Patient Capital Trust were down 7.8% Tuesday afternoon at 70.54 pence each.
KCC said there is no loss to its pension fund and "whatever the outcome" stressed there will be no impact to the council's cash reserves.
The investment represents about 4% of the council's total investments from its pension fund, which stands at GBP6.4 billion.
"Overall these investments have performed well with the total value increasing by 47% since December 2014. The pension fund is invested in a wide portfolio of instruments in order to secure a good rate of return and to mitigate against the risk of losses on any individual investments," the council said.
KCC said its investment "initially performed reasonably well", reaching a peak value in January 2017 of GBP317 million. But, according to the council, since then performance has "deteriorated".
As a result, the council's Superannuation Fund Committee was scheduled to hold a meeting on June 21 to discuss its investment in Woodford's equity funds.
The same committee held a meeting on May 31 to discuss its overall pension fund investment strategy but was not expected to discuss Woodford. However, the committee noted Woodford's equity funds shed a further GBP560 million from "redemptions and further weak performance".
As a result, the committee unanimously decided to redeem its investment from Woodford with immediate effect and not wait until the June 21 meeting.
"Consequently, steps were taken to make the necessary arrangements to redeem the investment on Monday, June 3," the council said.
On Monday, however, Woodford cancelled all redemptions from his equity funds.
The equity fund said: "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."
On Monday, fund supermarket Hargreaves Lansdown PLC removed LF Woodford Equity Income Fund and Woodford Income Focus Fund from its Wealth 50 list.
"As the fund can't be traded, we have made the decision to remove it from our Wealth 50 list of favourite funds. We have also removed the Woodford Income Focus Fund," Hargreaves said in a statement.
Shares in Hargreaves were down 5.1% Tuesday afternoon at 2,114.45 pence each.
According to the Financial Times, six of Hargreaves' multi-manager funds were exposed to the Woodford equity fund by around GBP700 million in total.
