Neil Woodford has pledged that his flagship Woodford Equity Income fund's exposure to unquoted companies, including his stakes in stocks listed on Guernsey's stock exchange, will fall below 10% by the end of the year.
Woodford's holdings in unquoted companies, including those admitted to Guernsey's International Stock Exchange as a means of the fund remaining below the City regulator's 10% limit on exposure, have risen to 18% of his £4.4 billion Equity Income fund.
The manager said in a blog on his website that this would fall below 10% by the end of the year, as unquoted companies prepare for stock market flotations on mainstream exchanges like the US Nasdaq index.
Sales of the stocks to other investors and further transfers of unquoted assets to the Woodford Patient Capital (WPCT) investment trust, providing shareholders of the trust approve, could also play a role.
'As we said on 1 March, our long-term intention is not to have any exposure to unquoted holdings in Woodford Equity Income,' he said.
'This process is already underway and the fund’s exposure to unquoted securities (including those listed on less well-known exchanges where there is little or no trading activity) will decline over the remainder of the year to below 10%.'
Woodford said the exposure to unquoted stocks was likely to 'naturally decline' as more mature unlisted companies, like Oxford Nanopore, prepare to float.
'Some others are approaching inflection points where new investors are coming onto the register and these afford liquidity opportunities that we will be able to take advantage of,' he added.
'It is also the case that some of the smaller early-stage companies in the fund have developed so quickly that they will, over the next few months, be launching full IPO processes.'
Hargreaves backs Woodford's move
'We’ve been talking to Woodford Investment Management for some time about the level of less liquid assets in the Equity Income fund,' said Mark Dampier (pictured), Hargreaves Lansdown head of research.
'We think plans to eliminate direct holdings, while retaining some exposure through Woodford Patient Capital Trust, is the right approach.'
Richard Troue, Hargreaves Lansdown head of investment analysis, said the broker had been urging Woodford to address the weighting of unquoted stocks in his portfolio, arguing they increased the risk of the fund.
'While the unquoted companies have been successful investments overall since the launch of the fund in June 2014, and positively contributed to fund performance, as these investments grew in number they added risk to the portfolio.'
'Woodford's investment in these types of higher-risk stocks are part of his appeal, and an integral part of his past success, but we believe unquoted investments in a fund of this nature should be a cherry on the top, not a piece of the pie.'