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UK's Woodford Equity Income Fund Suspended

Tanzeel Akhtar

On June 3, U.K.’s most high-profile fund managers, Neil Woodford’s £3.75-billion ($4.55 billion) LF Woodford Equity Income Fund, was suspended as the fund manager struggled to free up cash to pay investors looking to get their money out.

What Woodford Said 

Woodford released a statement on June 4 informing investors of the status of the LF Woodford Equity Income Fund.

On July 29, the fund posted an update that stated the suspension will continue through December. 

"When the fund reopens, you will see a much more liquid portfolio, but one that reflects the same investment strategy. The portfolio will continue to be focused on undervalued companies, but the majority of them will be FTSE 100 and FTSE 250 index constituents," according to the statement. 

Why It's Important 

The fund has 11.2% exposure to U.S. companies. One of the top 10 holdings of the LF Woodford Equity Income Fund includes a litigation funding company, Burford Capital Limited (OTC: BRFRF)

Earlier this month, Burford came under attack from short seller Muddy Waters.

On Aug. 7, shares in Burford Capital plummeted down to $8 after Muddy Waters took a short position on its stock, betting that the price would drop. Since then the shares have recovered and are trading at around $10.

The hedge fund has accused the company of “egregiously misrepresenting” its returns.

Burford Capital’s top management is in effect primarily compensated for aggressively marking cases in order to generate non-cash fair value gains, according to Muddy Waters. 

“BUR is a perfect storm for an accounting fiasco. BUR’s governance structures are laughter-inducing," the short report said. 

Burford's CFO is the wife of the company's founder and CEO, the short seller said. 

"Under the best of circumstances, this should alarm investors; however, with a company that consistently books non-cash accounting profits, it is unforgivable."

A Burford Capital spokesperson said the Muddy Waters report is "false and misleading."

The short report is "littered with factual inaccuracies, simple analytical errors and selective use of information," the spokesperson said. 

The CFO in question has since been demoted, The Guardian reported Aug. 15. 

Price Action

Another U.S. company in the top holdings of the Woodford fund is Theravance Biopharma Inc (NASDAQ: TBPH) were trading higher by 1.08% at $21.54.

Burford Capital shares were trading up 6.15% at  at $10.19 at the time of publication Tuesday. 

The stock has a 52-week high of $26.75 and a 52-week low of $4.75.

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