A meltdown at money manager Neil Woodford’s flagship fund is being probed by regulators – as his fees since blocking withdrawals surged past £1million.
Mr Woodford’s Equity Income fund shut its doors a fortnight ago because it did not have enough ready cash to pay departing savers, sending shockwaves through the City.
He is now selling assets to free up funds and pay off anyone who wants their savings back. The fund is not expected to reopen for weeks.
Neil Woodford’s Equity Income fund shut its doors a fortnight ago because it did not have enough cash to pay departing savers
The Financial Conduct Authority watchdog (FCA) last night said it is formally investigating what went wrong, following criticism of Mr Woodford for ploughing millions of pounds into high-risk, hard to sell assets.
But the stock picker’s company is still charging estimated fees of nearly £100,000 per working day to savers with money trapped in the fund.
It has been closed for 11 working days, meaning Mr Woodford’s company has picked up more than £1million.
The 59-year-old has come under pressure to stop charging the fees, but has refused to act. Andrew Bailey, the FCA’s boss, again called for Mr Woodford to consider axing fees.
In a letter to Parliament’s Treasury Select Committee, Mr Bailey said: ‘There is no requirement on fund managers to reduce or waive entirely their investment management fees during suspensions.
‘However, a firm can choose to do so … as a gesture of support to investors.’ Mr Woodford shut his fund after being hit with a rush of investors seeking their cash.
MP Nicky Morgan has called on Woodford to waive his fund’s fees
The final straw came when Kent County Council wanted £263million. Mr Woodford was unable to easily sell enough investments to raise the money.
Hargreaves Lansdown, the investment platform thousands of savers used to put their money into the Woodford fund, has stopped charging fees until it reopens.
Its chief executive Chris Hill is not taking a bonus until the situation is resolved, and is putting pressure on Mr Woodford to waive his own fees.
Tory MP Nicky Morgan, chairman of the Treasury committee, said: ‘Investors expect a service in return for their fees.
‘Mr Woodford should waive his fund’s fees now and provide his customers with the same breathing room that he has afforded himself.’ In his letter to the committee, Mr Bailey said: ‘We have opened an investigation but cannot comment further.’
A spokesman for Mr Woodford’s company said the fees are deserved because he is working to get investors their money.
He said: ‘Woodford Investment Management will continue to receive a fee, as they focus on repositioning the portfolio, to cover the infrastructure and resource costs associated with managing an actively managed fund.’
There are also questions over two other investment portfolios managed by Mr Woodford. The share price of his Patient Capital Trust dropped to a record low last night on fears about the quality of its investments.
Another fund, Income Focus, suffered a hit as investment service Fidelity banned customers from putting new money in.
It came as senior Bank of England official Anil Kashyap warned the closure of Equity Income could become a major problem.
Speaking to MPs, Mr Kashyap said: ‘I don’t think Woodford per se creates financial stability risks, but if it undermines confidence in the system it could be a very big problem.’