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Exclusive: Fidelity blocks investors from buying second Woodford fund 

Neil Woodford
Neil Woodford's Income Focus fund is now in the firing line

One of Britain’s largest fund shops is blocking its customers from putting new money into the Woodford Income Focus fund, Telegraph Money can reveal.

Fidelity Personal Investing will continue to allow customers to withdraw money from the £325m fund but will not let investors buy new units.

The move is a further blow to under-fire manager Neil Woodford, who was forced to suspend trading in his flagship £3.7bn Equity Income fund earlier this month following a flood of investors asking for their money back. 

A high allocation to hard-to-sell unquoted companies within the portfolio forced Mr Woodford to suspend trading to meet redemption requests.

Attempts to rectify this were made, including listing some of the stocks on the Guernsey stock exchange, although this proved not to  be enough. Earlier today the Financial Conduct Authority (FCA), the regulator, announced it had opened an investigation into these events.

The still-open Income Focus fund has no unlisted companies within the portfolio but has seen large investor withdrawals in recent weeks, with more than £175m wiped off its value since the Equity Income fund was suspended. The fund is now worth £325m, down from nearly £500m.

A spokesman for Fidelity said: "We believe this is in the best interest of our platform clients unless, and until, uncertainties are resolved. The restrictions are a temporary and precautionary measure."

Hargreaves Lansdown recently confirmed it had ditched its £45m holding in the smaller Woodford Income Focus fund, which it held through its multi-manager fund range, having already dropped it from its Wealth 50 buy list.

Poor performance of the fund has been a factor in its fall in size. Since its launch in 2017, the fund has lost investors 22.1pc, while the average British income fund has made 3.5pc and the overall market is up 9pc.

A spokesman for Woodford Investment Management said: “The fund was set up with the aim to deliver an income of 5p per share per year, which it has achieved.

"It mainly invests in companies that pay a dividend and ever since its launch has contained a combination of large, mid and small-sized stocks. It doesn't have any exposure to unquoted securities and consequently isn't exposed to the same issues that the Woodford Equity Income fund is."

 

Tom Sparke of GDIM Discretionary Fund Managers, said it was the first time he has heard of this restriction being put in place.

“It seems a bit Nanny State to put restrictions on what investors can buy. I think it's taking the power out of investors' hands, which is not the right decision,” he added.

It is the most liquid of all of the strategies so to take a decision like this seems strange.”

Investors will still be able to trade the Patient Capital investment trust through the Fidelity fund shop. Investors of the Equity Income fund remain unable to buy or sell their units.

Of the seven other fund supermarkets approached by this newspaper, none said they are thinking of applying the same restrictions on their clients.

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