Fidelity blocks investors from buying Woodford Income Focus Fund
Fidelity has banned its customers from putting new money into a second Woodford fund, dealing another blow to the star fund manager whose reputation has been tarnished by an investor exodus.
The investment platform, one of Britain’s biggest said it had to decided to restrict new investments in the £325m Woodford Income Focus Fund, a sister fund to Neil Woodford’s flagship £3.7bn Equity Income Fund.
The Equity Income Fund was suspended on 3 June after clients rushed to withdraw their cash. Investors have been pulling out after a series of bad stock market bets slashed the value of their investments. Fidelity customers and others can still withdraw money from the Income Focus Fund.
A Fidelity spokesperson 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.”
Shares in Woodford’s FTSE 250-listed vehicle, Patient Capital Trust, slumped to a fresh low of 51.8p on Tuesday. They have fallen almost 33% since Woodford’s flagship fund was suspended.
Fidelity’s move emerged as Bank of England policymaker Anil Kashyap warned that if the Woodford debacle were to undermine confidence in the financial system, it could become a very big problem, and that the central bank was watching closely.
In response to a question from Nicky Morgan, the chair of the Treasury committee, Kashyap said: “I don’t think Woodford per se creates financial stability risk, but if it undermines confidence in the system it could be a very big problem.”
Kashyap, a member of the Bank’s financial policy committee, added: “It’s a very visible thing, it’s got people worrying about whether or not this is going to be present elsewhere. We are going to keep watching it and if it ever gets to the point where there’s substantial assets in a vehicle like that, that could give rise to widespread spillovers, we’d have to do something about it.”
But he said an asset fire sale, where assets are sold quickly on the cheap, would only be a threat to financial stability if a lot of assets were being sold at once.
He said the Bank was more worried about the public’s loss of confidence, which could “generate a run of some sort. We worry about the trust issue per se.”
The Woodford saga has also prompted Gina Miller’s wealth management firm to ask the UK government to commission an independent review of Britain’s financial regulator, the Financial Conduct Authority. She has previously criticised the FCA over its handling of European financial regulations.
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