Woodford and Barnett Offload Russian Real Estate Shares

Raven Property buys back nearly 18% of its share capital from Woodford Investment Management and Invesco

James Gard 1 July, 2019 | 3:04PM
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A UK-listed Russian property firm has bought back the entire stake owned by Woodford Investment Management as well as a substantial stake owned by Invesco Asset Management, according to a stock exchange announcement.

Raven Property Group (RAV) has bought 106 million shares, or 17.7% of its issued share capital from both firms at a price of 36p, just below the current market price of 37p and just half of the net asset value of 72p.

Woodford Investment Management holds 72 million shares or 12% of the existing share capital. Raven said the transaction relates to the listing rules put in place by the Financial Conduct Authority.

Woodford has been busy selling off stakes in companies held by Woodford Equity Income since the fund was gated to investors in early June to improve liquidity and reduce the exposure to illiquid assets. The firm is expected to update the market on whether it will re-open the fund after 28 days (1 July) but analysts – and the head of the Financial Conduct Authority – believe the fund will be gated for much longer.

Raven was founded by Anton Bilton, who also founded Ibiza property firm Sabina Estates, another company held in the Woodford Equity Income fund. Raven invests in commercial property in Russia and has offices in Guernsey, Moscow and Cyprus.

Fund manager Mark Barnett, meanwhile, holds 25.2 million shares and 20.9 million preference shares in Raven through his Invesco Income fund, representing 0.77% and 0.64% of the fund's assets respectively, according to Morningstar Direct data. Raven's ordinary shares constituted 0.67% of Invesco High Income, which is also managed by Barnett, with preference shares making up 1.02% of the portfolio. Both funds have a Bronze rating from Morningstar analysts

The deal with Invesco involves the purchase of a minimum of 17 million shares and a maximum of 34 million, representing between 2.8% and 5.7% of Raven’s issued share capital. Invesco confirmed that is it is taking part in the buy-back along with other shareholders.

Barnett worked with Woodford for 17 years and took over the running of the fund from him in 2014. There is significant overlap between the holdings of the two manager's portolios, according to analysis seen by Morningstar. 

Of 101 holdings in the Invesco Income fund, some 57 appear in one of the mandates run by Woodford. These range from FTSE-listed stocks such as British American Tobacco, Legal & General and Stobart, to unquoted companies including Oxford Nanopore, Ombu and Spin Memory.

Unloved Companies

Morningstar analyst Peter Brunt said in a note last year that Barnett "often invests in companies and areas of the market that are unloved or misunderstood". Analysts praised the fund's experienced manager but noted that "a sustained period of underperformance has placed pressure on the fund's longer-term track record". The fund was down 10% last year, underperforming its benchmark.

Raven preference shares make up more than 2% of the Woodford Equity Income portfolio and the ordinary shares make up a much smaller proportion at 0.6%. Woodford Income Focus, which remains open to investors, has 1% of its portfolio in Raven ordinary shares and 2% in the preference shares.

Barnett has reportedly been reducing his stakes in unlisted holdings in recent months - they now account for around 4% of the income fund's assets. 

Raven intends to cancel a minimum of 89 million shares out of the 106 million bought back in the transaction. Its shares climbed more than 5% as Woodford's sale was announced. 

Peter Sleep, senior portfolio manager at Seven Investment Management, says: "This transaction will help Woodford and Barnett reduce their exposure to Raven Property, raise cash and reduce the overhang on the equity. It represents a winfall for the remaining shareholders as the two are being bought out ata discount to the net asset value of the firm."

He adds: "The greater part of Woodford's exposure to Raven is a £94 million preference share, which may be more difficult to sell. His Income Focus fund also holds the preference share and a convertible bond." 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Invesco UK Eq High Inc UK Z Acc282.16 GBP-0.58Rating
Invesco UK Equity Inc UK Z Acc281.28 GBP-0.54Rating
Raven Property Group Ltd20.00 GBP0.00
Raven Property Group Ltd3.82 GBP0.00

About Author

James Gard  is content editor for Morningstar.co.uk