Kent County Council has been unable to retrieve £263million of pension money invested via a fund manager after his company suspended trading.
The move by Neil Woodford, of Woodford Investment Management, came after KCC was the latest in a line of investors preparing to pull its cash.
The Woodford Equity Income Fund is reported to have plunged from a value of over £10bn in 2017 to just £3,7billion, according to the Financial Times.
KCC says the investment with Woodford initially performed reasonably well, reaching a peak value in January 2017 of £317million. But since then, performance has deteriorated and in March 2019, the authority’s Superannuation Fund Committee resolved to reconsider the investment at its meeting on June 21.
However, last month it was revealed that the overall value of the Equity Fund (KCC and other investors holdings) had reduced by a further £560million due to redemptions and further weak performance.
Kent County Council made the decision to remove funds immediately and steps were taken to make the necessary arrangements to redeem the investment on Monday, June 3.
But the same day the freeze on the equity income fund was announced.
A Kent County Council spokesman said: “The announcement on Monday that trading in the investment fund was suspended was not anticipated. KCC is disappointed that, as a major investor in the fund, we did not receive this prior notification.
“We do not know whether the decision to suspend trading was linked to the council’s decision to redeem. The council is committed to seeking the best outcome and could still seek a managed redemption in order to maximise the benefits for the pension fund.”
The investment with Woodford Equity was made in two tranches of £200m in 2014 and a further £60m in 2016.
The spokesman added: “At this stage there is no loss to the pension fund, and whatever the outcome there will be no impact on the council’s cash reserves or service provision.
“This represents around 4% of the council’s total investments of £6.4billion from its pension fund. Overall these investments have performed well with the total value increasing by 47% since December 2014. The pension fund is invested in a wide portfolio of instruments in order to secure a good rate of return and to mitigate against the risk of losses on any individual investments.”
The pension fund is managed on behalf of the council’s 65,000 current and ex-employees eligible for pension benefits, as well as for employees and ex-employees of affiliated bodies such as district councils and former maintained schools.It is understood thousands of individuals and institutional investors are affected by the suspension.
County Councillor Barry Lewis, who represents Margate at the authority, said: “I am very worried that KCC is involved with this company which is refusing to hand back our money. It is casino capitalism at its worst and KCC should not be gambling with our money.”
Kier the construction company caused the biggest problem for Neil Woodford where he held a large investment. Kier confirmed and reported that they were not going to achieve the profits they had forecast this causing the value of the shares to fall this subsequently affected Neil Woodford. It is only a suspension. Neil Woodford still has approximately £4billion invested.
Is there an old saying ” do not put all your eggs in one basket”? should have known better !
If you read the article you’ll see that, indeed, they didn’t have LL their eggs in one basket.
Sometimes it’s worth reading alllllll the way to the end of a story, rather than just jumping straight to the comments and giving your rather useless comments.
First Thanet loose money through bad investment and now it looks like (Kent) KCC have done the same not keeping an eye on money. I hope that the other funds are being scrutinised carefully to see if they need to be moved to a saver option. How does this affect all the past & future pensions payments or even council funds?
Aren’t all investments “bad investments” in the end? You can’t just get “something for nothing” just by investing money in the belief that , magically, you will get even more out at the end. Someone has to actually DO something! They have to work creating something even if is just something for entertainment like music or novels. Or, less excitingly, paper bags or bananas or trainers or computer chips. Or work to make society function better like doctors or bin men or care workers.But isn’t it strange that the people who actually DO something and MAKE something or HELP someone get the worst pay and the investors are the ones who expect the big earnings? Our society needs a major overhaul in priorities.
So now what? Yet more cuts so KCC can afford to pay its pensioners?
Nope, read the article.
KCC have a track record! Remember the losses in 2008 from largest investment of any council after the Icelandic investment bank collapse.
Apparently, Woodford equity had changed its investment policy from long term holdings of blue chip companies with regular dividend payments towards unlisted less established companies.The difficulties over Kier started a process where investors lost confidence and this caused in effect, a run on the fund, similar to that which took place with Northern Rock.
Hopefully, this an isolated incident, but Woodford has also embarrassed Hargreaves Lansdown a significant investment platform.If their investors take fright, the problem may become generalised.
As for KCC,one has to say ‘fool me once shame on you, fool me twice shame on me’. This is becoming a trend with their investment policies.
They are expected to have greater market knowledge than a small private investor and I think questions should be asked about why, yet again they have been caught napping.
I don’t think investing in more govt bonds or somehow diversifying is the answer.Instead KCC need to review the process behind who authorises their investment activities and their capabilities.
Hopefully, the fund will be run down in a managed way, but KCC may not get all their money back.
By the way, it’s not THEIR money they won’t get back, It’s OURS! What do you expect from a Tory run council who have done nothing but accept this lousy governments cuts. As a Thanet council tax payer I’ve just received a 5 % increase in my tax and what have KCC given me… 2.4% increase in my pension while cutting many public services.
Shame on them and all they represent!!