Woodford contagion spreads to third fund

HARGREAVES Lansdown has pulled £45m of savers’ money out of Neil Woodford’s Income Focus fund, as analysis reveals it has shifted towards potentially riskier smaller companies.

When Income Focus launched in 2017, as a smaller sister to Woodford’s now-troubled flagship Equity Income fund, it raised £553m from investors.

At the time, Income Focus ploughed 21pc of this money into some of the stock market’s biggest companies, with the aim of giving its investors a steady, reliable income from dividends.

But less than two years on, Income Focus has dropped all of its holdings in these huge businesses and shifted its focus to potentially riskier tiny firms.

Data from March shows 0pc of the Income Focus fund is invested in giant firms – those which account for the top 40pc of the stock market by size. In contrast, 27pc of the fund is sitting with micro companies – up from 7pc when it launched.

Woodford, 59, was last week forced to freeze withdrawals from his flagship Equity Income fund. Investors, including Hargreaves Lansdown’s Multi-Manager High Income Fund, have now pulled £116m from Income Focus, sparking fears it too could struggle to sell assets and give savers their money back.

A Woodford spokesman said the fund manager ‘ believes there are attractive investment opportunities in quoted smaller and mid-sized liquid stocks’.

Bank of England official Alex Brazier said freezing investor withdrawals could encourage more to pull their money out if they thought a fund was at risk of shutting its doors.