UK watchdog to probe suspended fund
A formal investigation has been launched by the City watchdog into Neil Woodford’s suspended equity income fund in the latest blow for the under-pressure investment guru.
In a letter to the Treasury select committee chair Nicky Morgan, Financial Conduct Authority (FCA) chief executive Andrew Bailey confirmed the probe, but said he could not comment further.
The FCA has previously said it would launch a formal investigation if it “believes there are circumstances suggesting serious misconduct or non-compliance with the rules” surrounding the events leading up to the fund’s suspension earlier this month.
It is understood the inquiry is related to Mr Woodford’s Guernsey-listed assets amid concerns the move was made to sidestep rules limiting the proportion of illiquid assets in the fund to 10%.
The FCA revealed that at one stage the equity income fund had around 20% invested in illiquid assets — those that are hard to trade, sell, or value.
Mr Bailey said the regulator had made contact with the fund’s authorised manager, Link Fund Solutions, relating to two breaches of the 10% limit.
The UK Treasury select committee is holding a hearing with Mr Bailey on the Woodford fund next week.
Confirmation of the probe comes as the Woodford crisis deepened with Fidelity Personal Investing blocking customers from putting cash into a second Woodford fund.
Fidelity said it was restricting new investments into the LF Woodford Income Focus Fund — a sister fund to the suspended £3.7bn Woodford Equity Income Fund — as a “temporary and precautionary measure”, although withdrawals are not affected.
A spokesman for Fidelity said: “We believe this is in the best interest of our platform clients unless and until uncertainties are resolved and we are not restricting withdrawals from Woodford Income Focus.
The restrictions are a temporary and precautionary measure.
Separately yesterday, Bank of England policymaker Anil Kashyap warned the suspension of the Woodford equity income fund could become a “very big problem” if it undermines investor trust in the financial system.
Mr Kashyap told MPs at the committee hearting that the Woodford saga was being watched closely for signs of “spill over” into the wider system. He said while the fund’s suspension is not a financial stability risk at the moment, it could pose problems if it sparked a run on similar investments.
