Neil Woodford has said offering full transparency on portfolio holdings when launching the Woodford Investment Management business five years ago has become "more damaging" in a Q&A YouTube video after the Equity Income fund's suspension was continued.
Woodford launched the Equity Income fund with much fanfare around the fact full portfolio holdings would be listed on the company's website.
However, Woodford said this has now been to its detriment: "When we set Woodford up five years ago, we felt our investors would value the information that we were able to provide. I think what we underestimated is how our full portfolio transparency would become more damaging in a period of underperformance. In essence, the transparency became more damaging than the value it created for our investors. That's why we've withdrawn full portfolio transparency."
Following the initial suspension of the Equity Income fund on 3 June, the group said it will only publish the top ten holdings, with Woodford adding in the video "the core of our culture is really to be a transparent organisation - [we will] continue to provide information to our investors".
Yesterday (1 July) it was announced the Woodford Equity Income fund (WEIF) is to remain suspended, with authorised corporate director (ACD) Link Fund Solutions monitoring the situation "on a daily basis".
Dealing in the fund was suspended by Link Fund Solutions on Monday 3 June for at least 28 days following mass outflows and liquidity issues.
Yesterday the ACD said the suspension of the issue, cancellation, sale and redemption of shares in the fund would continue.
"After consideration of all current circumstances relating to the fund, we have, in conjunction with the fund's depositary, concluded that it remains in the best interests of all investors in the fund to continue the suspension," a statement from Link Fund Solutions said.
"Woodford Investment Management has been taking steps to reposition the fund's portfolio, to realise the unquoted and less liquid stocks and invest in more liquid investments. This has continued since dealings in the fund were suspended and Woodford continues to invest in opportunities in order to meet the fund's investment objectives."
The ACD said it will continue to monitor the situation on a daily basis to and will formally review the suspension with the depositary at least every 28 days.
"We understand that the suspension of dealings may be causing concern to you as an investor in the fund," the statement continued. "We can assure you that we are striving to do all we can to bring further clarity to the situation as soon as possible. All decisions will continue to be taken in the best interests of investors. We expect to be in a position to provide further information to investors on the next steps in relation to the fund before the next 28 day review, being 29 July 2019."
In the video to investors, Woodford said there was "no prescribed limit" on how long the suspension will be and it will give him the time to "execute the strategies we've outlined, in other words, the shift in the portfolio from illiquid and unquoted into more liquid in a way that ensures that we don't damage the interests of our investors".
He added the portfolio 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.
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."
Woodford said (under)performance has been at the "heart of the issues we confront". Over the past three years to 1 July, WEIF has lost almost 22% while the FTSE All-Share, its benchmark, has returned almost 30% and its peer group, the IA UK All Companies sector is up 29%, according to FE.
"People often ask me, what's the catalyst for delivering performance? I think many investors accept that the portfolio is populated with very undervalued companies.
"But they're looking for the catalyst, what is going to be the thing that will change perception in the stockmarket? And the truthful answer is that I don't know what that catalyst is. But over the long course of financial market history, valuation wins out."
He added that "share prices will correlate with reality sooner or later" and he was encouraged by the bid for BCA as "exactly the sort of thing that we hope and expect to happen going forward".
The manager also defended taking large positions in "individual unquoted and small- and medium-sized companies: "I was motivated to invest in undervalued assets, and size those positions with a view to the investment opportunity, the extent of the undervaluation. It is fair to say that, in some cases, the positions have become bigger because the stocks have performed very well."
He also added the firm is working "day and night" on executing the strategy of moving the fund to a more liquid portfolio.
The gating of WEIF in early 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 tme 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, he has sold around £300m of stock, including big sales of his stakes in the likes of housebuilder Crest Nicholson, real estate investment trust New River and takeover target BCA Marketplace. However, the £300m only really covers the withdrawal request of Kent County Council.
It was also revealed yesterday that Woodford had sold his stake in Raven Property Group, which is listed on Guernsey-based The International Stock Exchange.
The board of the Russia-focused property firm said the company had bought Woodford's 12% stake, as well as a smaller holding from Woodford's former employer Invesco, for 36p per share.
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, regulator the Financial Conduct Authority, have also taken their fair share of the blame.
A plethora of funds run by Woodford are a fixture in the lists of worst-performing investments in 2019 that are coming through as we enter the second half of the year.
According to analysis from platform AJ Bell, four of his funds are among the ten worst-performers in Q2 2019. The Omnis fund he used to run lost 14.6% and SJP UK High Income 7.43%. WEIF, meanwhile, was down 13.27% and his smaller offering, Woodford Income Focus, shed 12.53%.
The closed-end Woodford Patient Capital was the third-worst performing trust, down 30.69%.