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Neil Woodford's cult status hit by flagship fund's redemption freeze

London

NEIL Woodford, whose contrarian investment strategies once made him one of the UK's most celebrated money managers, suspended redemptions from his flagship fund as a spate of losses fuelled outflows and threatened to burn remaining clients.

The move aims to protect investors in the LF Woodford Equity Income Fund by giving him time to reposition illiquid investments, the company said in a statement.

Yet it's already adding to pressure on the firm. After the Monday announcement, UK investment platform Hargreaves Lansdown dropped that fund and another that Woodford oversees from its Wealth 50 list of favourite funds.

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It's a dramatic turn for Mr Woodford, 59, who built his reputation into a cult following by calling major swings in technology, tobacco and other stocks over decades at Invesco Perpetual and once managed the UK's largest equity fund. He launched his own fund in 2014 and saw it get off to a roaring start before stumbling into a rough patch.

His flagship fund fell 18.1 per cent in the past year and 6.2 per cent over three years, putting him near the bottom of his peer group. The fund is down 7.1 per cent year-to-date, while the FTSE All-Share Index has advanced. He's incurred losses in recent years on picks such as biotech developer Prothena Corp., online estate agent Purplebricks Group Plc and lender Provident Financial Plc, according to figures through March posted on his firm's website.

The flagship fund's assets shrank by £560 million (S$971 million) in May through a combination of investor withdrawals and poor performance. The fund manages about £3.8 billion, according to Morningstar data.

A significant drop in size can undermine Mr Woodford's ability to run the fund effectively, Hargreaves Lansdown said in a statement explaining its decision to remove the flagship and the Income Focus Fund from its list of picks.

"We are advocates of long-term investing and think Woodford's multi-decade track record remains compelling, but we don't underestimate the disappointment investors must feel with Woodford's recent performance," said Emma Wall, Hargreaves's head of investment.

The halt on redemptions and purchases took immediate effect and will remain until further notice, according to Mr Woodford's website. The firm promised to keep investors informed about the likely duration of the suspension. BLOOMBERG