Neil Woodford’s ‘sorry saga’ finally ends as flagship fund set to be wound up
Neil Woodford is to be fired from his flagship fund, which will shortly be wound up, the administrator charged with overseeing its frozen assets has announced.
Corporate director Link Fund Solutions has written to investors to say it will return their cash as soon as possible from Woodford Investment Management.
Read more: Watchdog calls for clearer investor warnings in wake of Woodford saga
The former star stockpicker’s fund has been frozen since June, with people unable to withdraw their money.
“After careful consideration, the decision has now been taken not to reopen the fund and instead to wind it up as soon as practicable,” Link told investors.
“This is with a view to returning cash to investors at the earliest opportunity.”
Link added that it had been unsuccessful in trying to sell off Woodford’s unlisted assets, saying attempts had “not been sufficient to allow reasonable certainty” as to when the fund could reopen.
“It is now in the best interests of all investors for the fund to be wound up by way of an orderly realisation of the fund’s assets,” Link added.
It said this would enable investors to get their money back more quickly though interim payments than if the fund remained suspended for a longer period of time.
Blackrock and Park Hill will now sell off Woodford Equity Income Fund’s assets.
Meanwhile the share price of the underperforming and publicly listed Woodford Patient Capital Trust (WPCT) fell eight per cent today as it said:
The Board of Woodford Patient Capital Trust plc (the “Company”) notes the statement by Link Fund Solutions Limited (“LFS”), the Authorised Corporate Director of the LF Woodford Equity Income Fund (“WEIF”), that: (i) the decision has been taken by LFS not to re-open WEIF and instead to wind it up as soon as practicable; and (ii) Woodford Investment Management Limited will, with immediate effect, cease to be the investment manager of WEIF.
As previously announced, the Board has been undertaking a review of the Company’s management arrangements and will make a further announcement in due course.
Link and Woodford had agreed to suspend the equity income fund until December but Link said today that not enough of Woodford’s portfolio had been repositioned as he sold off assets to fund redemptions.
“As a ‘forced seller’ of its assets to meet redemptions, the values received by the fund for such assets could have been adversely impacted and the fund might not have received full value from such sales,” Link said.
The fund’s winding up will begin on 17 January 2020, in order to offer three months’ notice required before the process begins.
While Link had mooted whether it could merge the fund with another, or extending the suspension period, it decided these options were not in the best interests of investors.
The winding up means Neil Woodford will lose his role as investment manager at the fund.
Read more: Neil Woodford’s role at risk as listed fund suffers £232m loss
That means his name will be dropped from the fund, with the name changing from LF Woodford Equity Income Fund to LF Equity Income Fund.
“This was Link’s decision and one I cannot accept, nor believe is in the long-term interests of the fund’s investors,” Woodford said.
Investors can expect to receive the first of their repayments at the end of January.
Beleaguered stockpicker Woodford has lost at least £43.5m from selling off stocks from his frozen fund.
He had previously assured investors that the suspension would mitigate pressure to offload assets at lower prices.
While the fund manager has blamed unfavourable markets for turning his investments sour, Hargreaves Lansdown has criticised him for not being “truthful” about his frozen fund.
Almost 300,000 Hargreaves Lansdown investors were hit by Woodford’s equity income fund’s shock downturn. Hargreaves investors had £1.6bn locked up in the frozen fund.
Woodford controversially continued to charge fees despite the fund being closed to redemptions.
Meanwhile the fund manager’s role at the top of his publicly listed fund, Woodford Patient Capital Trust (WPCT), is also at risk after it lost £232m.
WPCT assets dropped 21 per cent in value over the last three months, it revealed in late September. Chairman Susan Searle said the fund “continues to evaluate” Woodford’s position as portfolio manager as it seeks rivals candidates.
Woodford said he was “very sorry” for the “extremely disappointing” returns for investors.
WPCT also stands accused of stretching rules on unquoted holdings, with its biggest holding listed on an obscure stock exchange where its shares have only been traded once.
“Today’s announcement at least confirms the end to a sorry saga but this will be of cold comfort for investors locked in the fund,” said AJ Bell’s head of active porfolios, Ryan Hughes.
He called on the Financial Conduct Authority to speed up its review of illiquid assets held by investment funds.
“Woodford has not managed to move out of his unlisted assets and into more liquid listed equities quickly enough to re-open the fund in December, meaning Link has determined it’s in the best interests of investors for the fund to close entirely.
“Woodford’s name is also being wiped off the fund, as the assets will be handed to BlackRock and Park Hill to sell off, meaning Neil Woodford will no longer be the fund manager – instead it will be re-named the ‘LF Equity Income Fund’.
Read more: Woodford Patient Capital trust accused of stretching rules on unquoted assets
He also warned that there is more pain to come for investors, who will be spared direct fees during the winding up process but will still incur costs from the fire sale of illiquid assets.
“These costs will be taken out any proceeds from the sale, so will eat into the money investors get back,” Hughes said.
“It will be a while before investors get back all the money due to them. The liquidity assessment carried out by the fund and divulged to the FCA in April this year showed that a third of the fund was in assets that would take six months to a year, or more, to liquidate.”