Former star stockpicker Neil Woodford has condemned the decision to shut down his flagship Equity Income Fund (WEIF) and fire him as its manager, claiming it is not “in the long-term interests” of investors.
Link Fund Solutions, which was tasked with administering WEIF’s suspension, wrote to investors this morning to tell them the fund will be wound up and Woodford had been sacked as manager, but Woodford himself criticised the decision.
“This was Link’s decision and one I cannot accept, nor believe is in the long-term interests of LF Woodford Equity Income fund investors,” said Neil Woodford.
WEIF has been suspended since June, when the fund became overwhelmed by investor withdrawals and was forced to gate, leaving investors 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 morning.
Link said it had been unable to sell off Woodford’s unlisted assets and therefore could not guarantee that the fund could be reopened.
It said the decision to close the fund was taken “with a view to returning cash to investors at the earliest opportunity”.
The winding up of WEIF will begin on 17 January 2020, in order to give the three months’ notice required by regulations.
Fund supermarket Hargreaves Lansdown had around 300,000 investors trapped in WEIF, with a total £1.6bn locked up in the fund. A Hargreaves spokesperson said the company was “working closely with our clients to update them and keep them informed”.
Rebecca O’Keeffe, head of investment at Interactive Investor, said WEIF’s closure was “another lesson, were it needed, that illiquid assets and the open-ended structure do not make good team mates”.
News of WEIF’s demise sent shares in Woodford’s listed Patient Capital Trust (WPCT) tumbling. WPCT shares were down almost eight per cent by late morning.
WPCT has previously said it was considering Woodford’s position as manager of the fund, and had been seeking out a replacement.
O’Keeffe said the closure would “put further pressure on the Board of Woodford Patient Capital to take affirmative action”.
Catherine McKinnell MP, interim chair of the Treasury Committee, said: “This appears to the beginning of the end of a sorry state of affairs. This will have been a troubling time for investors in the Woodford Fund, who may not get any money back until at least January.
“There is still some time to go in this uncomfortable episode, which has raised important questions about the functioning of the funds industry. I’m sure the Committee will want to examine what lessons can be learned from this saga.”
Lee Wild, head of equity strategy at Interactive Investor, added that this was a “brutal warning” for stockpickers on their performance.
“If you don’t perform you lose your job,” he said. “It happens in the City every day of the week, but Woodford is easily the most high-profile victim in years.
“Yet it is investors in the fund who are feeling the real pain from the side-lines. Woodford may have been sent off the pitch, but investors are still stuck in the stands. Uncertainty remains as to how long they will have to wait for what’s left of the fund to be returned to them – they will have to watch this sorry saga play on for some time yet.”
“Too many illiquid assets, too many risky bets that didn’t come off,” was the take of Markets.com chief market analyst Neil Wilson.
“It’s pretty obvious that if they reopened the fund it would face a deluge of redemptions that they would be unable to meet. No sane investors in that fund would have stuck with it after all the publicity.”