The Woodford Equity Income fund (WEIF) has breached UCITS rules limiting the amount of unquoted stocks a fund can hold to 10% once more after two of its investee companies de-listed from their stockmarkets.
Artificial intelligence platform Benevolent AI and cold fusion firm Industrial Heat de-listed from the Guernsey-based International Stock Exchange, Woodford Investment Management told clients in a note seen by Investment Week.
This took WEIF over the 10% limit once again, a rule the fund had breached multiple times before its 3 June suspension. Woodford described the episode as "an inadvertent passive breach".
The firm added: "The Financial Conduct Authority's guidance, as for all UCITS limits, is that funds should be brought back into compliance following an inadvertent passive breach in a manner that is in the clients' best interests and within six months of the date of discovering the relevant breach."
Woodford confirmed to investors that "action to bring the fund back into compliance is already underway", having informed them before the gating it would reduce its illiquid exposure. This, the firm added, includes those listed on exchanges where there is currently little or no trading activity.
The firm said that the companies it owned that are, or were, listed on TISE have always been classified as illiquid and valued as such by its ACD Link Asset Services, in line with its fair value pricing policy.
The communication said that continues to be the case, adding: "The decision by Benevolent AI and Industrial Heat to delist from TISE will have no impact in how the assets are managed within the fund."
WEIF was suspended on 3 June following a prolonged period of outflows leading to a liquidity crisis. On Monday (29 July), Link confirmed the fund would be suspended until December.
It added this timeframe would allow "a realistic amount of time for Woodford to complete a measured and orderly re-positioning of the fund's portfolio".
A version of this article was first published by Investment Week, a sister title to International Investment