The investment empire of former star fund manager Neil Woodford came crashing down tonight after a bruising day which saw him sacked as manager of his flagship fund and resign from the remaining two, cementing the embattled stockpicker’s spectacular fall from grace.
The closure of Woodford’s Equity Income Fund (WEIF) was announced this morning by administration firm Link, which also sacked Woodford as its manager and stripped his name from the flagship fund.
Woodford then resigned as manager of his Patient Capital Investment Trust (WPCT), followed by an announcement that he had taken the “highly painful decision” to shutter his investment company shortly afterwards.
Woodford had initially condemned Link’s decision to fire him and shut down WEIF, saying yesterday morning: “This was Link’s decision and one I cannot accept”. Just hours later he announced his company was folding.
“I personally deeply regret the impact events have had on individuals who placed their faith in Woodford Investment Management and invested in our funds,” Woodford said.
WEIF was suspended in June after becoming overwhelmed by investor withdrawals, sparking a major crisis within the investment community and triggering an investigation into the fund by the Financial Conduct Authority.
Link had been tasked with repositioning the fund’s portfolio during the suspension, but was unable to sell enough of its illiquid and unquoted assets to guarantee WEIF could reopen in December as planned.
Link said that WEIF would be would open “as soon as practicable”, with “a view to returning cash to investors at the earliest opportunity”.
WPCT shares fell to a record low. Adrian Lowcock, head of personal investing at Willis Owen, said: “It will take time for the magnitude of Woodford’s fall from grace to really sink in.
“For years the manager not only dominated the equity income sector but the whole UK fund management industry. The high profile and complete collapse will reverberate around the industry for years to come.”
When Link announced the winding down of WEIF, it said the closure would allow the return of investors’ cash “as soon as possible”.
But now experts are warning that investors may not receive their money for over a year because of the complexity involved in winding down the fund.
Ryan Hughes, AJ Bell’s head of active portfolios, told City A.M. investors with money in the suspended fund should be prepared for the process of liquidating its assets to take “some considerable time”.
“[Link will] want to get it done and dusted but equally not rush it so the prices don’t get hit too much,” said Hughes.
Link has said it will begin winding up WEIF “as soon as practicable” after 17 January 2020 — the soonest the process can begin as regulations require investors to be given three months’ notice.
Hughes said it could take “between six and 12 months” from January to complete the process of closing down the fund, adding that the process could “easily” still be going on “a year later”.
Link has said it will oversee an “orderly” sell-off of the fund’s assets, which it has divided into two separate portfolios.
Blackrock will be responsible for “Portfolio A” — made up of WEIF’s listed assets — while Park Hill will be responsible for “Portfolio B” — made up of its unlisted and “highly illiquid” holdings.
Selling the fund’s listed holdings is likely to be relatively straightforward, and Link said it is expecting to make the first repayment to investors by the end of January next year.
Offloading the portfolio’s illiquid holdings is likely to be a much longer process, as unquoted and illiquid assets are much harder to sell.
“The unlisted stuff, the stuff that is difficult to shift, that’s going to take time,” said Lowcock.
“Some would argue you’d get a better price for it if you kept the fund suspended,” he added. “The timescale can be arguably longer on a fund closure because you’re winding up the remnants of the portfolio.”
Main image credit: Getty