The Woodford Equity Income fund, which is currently heading into its fourth month of suspension, is "on track" to reopen in December as planned, according to Link Asset Services.
Link announced on Friday (23 August) that in its role as Authorised Corporate Director (ACD), alongside the fund's depositories, it had conducted its regulatory mandated monthly review of the suspension and a December end to the gating "remains achievable," but suspension must remain in place for now.
Woodford Investment Management has been offloading assets during the suspension in efforts to overcome liquidity issues and meet investor redemption requests.
However, it is understood that the fund has further breached UCITS rules regarding the proportion of unquoted stocks that can be held in the portfolio following the delisting of Sabina Estates from the Guernsey stock exchange earlier in August.
Link's update also noted that Woodford Equity Income has lost 11.2% from 2 June to 21 August, during which time its benchmark FTSE All Share Total Return gained 1.5%.
For its part, Link's role in the fund's gating has led to a FCA review of the ACD market. The ACD will report again in 28 days.
Commenting on the update, head of active portfolios at AJ Bell Ryan Hughes said the news will be "welcomed by investors" and though "plenty can happen in the next four months" Link has shown "confidence that they can achieve this target".
28 days earlier
Link announced on 29 July that Woodford Equity Income would remain gated until December in order to provide "a realistic amount of time for Woodford to complete a measured and orderly re-positioning of the fund's portfolio".
"We have considered various alternatives and have decided that the best option in the interests of all investors is for the suspension of dealings to continue," the letter said.
"We anticipate that the suspension of dealing is likely to last until early December while we implement the strategy to re-position the portfolio in order for the fund to be re-opened at that time, and which is conditional upon achieving the target fund profile.
"In our view, this is a realistic amount of time for Woodford to complete a measured and orderly re-positioning of the fund's portfolio of assets ensuring that there is adequate liquidity while preserving or realising the value of the assets."
The ACD added that manager Neil Woodford had continued to "make sales where reasonable prices can be achieved" and that it would continue to monitor the progress of the repositioning of the portfolio "to ensure that it is on track and our aim of lifting the suspension in December remains achievable".
As part of the formal review, investors will continue to be updated every 28 days and will be informed of any steps they need to take prior to the lifting of the suspension.
In a statement published on the Woodford Investment Management website this afternoon, manager Neil Woodford said the team has made progress with the strategy over the last month, having already reduced exposure to unquoted and less liquid stocks.
He said: "What you will see when the fund re-opens is a portfolio with more FTSE 100 and FTSE 250 companies (80% of the proceeds from share sales since suspension have been reinvested in FTSE 100 companies), but still reflecting the same investment strategy. To reiterate, that strategy is founded on a belief that the global economic environment is not as robust as equity markets are implying."
The manager added that macroeconomic data is "increasingly supportive of this thesis", with growth starting to falter in the US, parts of Europe "barely growing at all", and headwinds facing emerging market economies. As such, Woodford said the team will continue to focus on domestically-focused UK businesses which, according to the manager, represent "the most attractively valued stocks in the investment universe".
Woodford added: "The suspension and the circumstances that led to it, may have had an impact on the price of some of the fund's assets, but they have not had an impact on the value of those assets.
"I understand the frustration, inconvenience and anxiety the continued suspension of the fund will be causing [investors] and I am extremely sorry for putting [them] in this situation."
The gating of WEIF on 3 June followed a request from Kent County Council to withdraw the £250m it had invested through its pension fund.
Woodford Investment Management has been hit with further blows since, with wealth manager St James's Place removing the firm from running £3.5bn worth of mandates and Omnis Investments replacing Woodford on its £330m Omnis Income & Growth fund.
WEIF has shrunk from a peak of over £10bn in mid-2017 to around £3.7bn at the time of the suspension. Most of the holdings sold in that time have been the large-cap names. As a result, its liquidity cushion - needed to meet further redemptions - has dwindled.
Woodford promised a "much more liquid" portfolio once the fund does re-open. So far, sales include stakes in the likes of housebuilder Crest Nicholson, real estate investment trust New River and takeover target BCA Marketplace as well as Raven Property Group.
The fallout has hit the active fund management industry, with Woodford and Link receiving the bulk of criticism. But others, including big backer Hargreaves Lansdown and regulator the Financial Conduct Authority, have also taken their fair share of the blame.
In a video to investors at the start of July, Woodford said that when the fund reopens it will be constructed in a way that is "entirely consistent with my investment rationale" focusing on undervalued assets but in the more liquid FTSE 100 and FTSE 250 indices.
Woodford also reassured investors he will not need to buy shares he doesn't like as there are many "profoundly undervalued" and "very attractive" more liquid securities in these stockmarkets.
Nor will he be selling unquoted positions at prices he is unhappy with: "I know that this is an area of concern for our investors. Because they think that, if we are selling assets, we'll have to take big discounts.
"My view is that we won't have to take big discounts. These assets are fundamentally attractive. And I'm confident we'll be able to execute the strategy and get very good value for our unquoted and illiquid portfolio."