Star fund manager Neil Woodford has dramatically suspended dealing in his LF Woodford Equity Income (BLRZQ62) fund and we can reveal the crossover in holdings between this collective and his listed fund Woodford Patient Capital Trust (WPCT).
Shares in the trust fell 16% on Tuesday morning, and are trading down 4% today to 68.1p.
The fund has been gated to allow Woodford time to sell all of the fund’s illiquid and unquoted shares.
The concern for Woodford’s Patient Capital Trust is that given the overlap in holdings with the equity income fund, including in illiquid and unquoted shares, such a fire sale could in turn end up lowering the net asset value (NAV) of the trust.
Analysts at Stifel have put together a table (below) detailing the extent of the crossover in holdings between the two funds.
WPCT has a different fee arrangement compared to most investment trusts in that it charges no annual management fee and the manager is only remunerated through a performance fee, meaning the asset manager only makes money if it hits a certain level of return.
Given the NAV of the trust has fallen since it floated, no performance fee has been paid and therefore Woodford Investment Management has effectively been managing it for free.
According to Stifel, if fees from Woodford’s other funds continue to decline due to more and more people asking for their money back, this could result in it being necessary for Woodford IM to start charging fee on WPCT to make it viable.