Link Fund Solutions – the fund’s administrator – today confirmed that as at 30 September 2022, the total value of all its assets minus liabilities – Net Asset Value (NAV) – stood at £79.9m.

It plans to distribute around £20m of the fund’s cash as part of the fifth tranche of payments to investors and said it will write in November to confirm the amount. Either way, this latest payment and the NAV are lower than expected.

Since the last update in June, there has been a steep fall in the value of its remaining assets from £118.5m, and £142.4m calculated in May

This is because the fund now holds relatively few assets – Atom Bank, Benevolent AI, Freevolt, Mafic, Nexeon, Origin, RM2 and Rutherford – and some of the shareholdings have relatively large weightings compared to others.

As such, a change in the value of such assets “will lead to a disproportionately large percentage increase or decrease in the fund’s NAV”.

The value of Benevolent AI has fallen from €8 per share to €3.91 per share. This is equivalent to a fall in the total value of the asset held by the fund of around £31.2m (or 26.75%).

Karl Midl, managing director, for and on behalf of Link Fund Solutions Limited, wrote: “We will continue to calculate and publish the fund’s NAV quarterly on or shortly after the final business day of December, March, June and September (or between these points if there is a change to the valuation of any asset held by the fund which will materially impact the Fund’s NAV).

“You are reminded that due to the illiquid nature of the fund’s remaining assets, their valuation can materially change, and it is possible that their valuations may fall as well as rise. This may have an impact on the fund’s NAV and, therefore, the total amount that will be received by investors in future capital distributions.”

Given the illiquid nature of the remaining assets, Link said it will continue to wind up the fund “in a manner and at a pace which seeks to achieve the best outcome for investor”, but added that some of these assets may not be sold before mid-2023.

Challenging economic outlook

Ryan Hughes, head of investment partnerships at AJ Bell, said the £20m payment represents roughly 25% of the remaining balance of the fund but leaves a further £60m of assets in a number of unlisted companies that still need to be sold.

“With market volatility high and the economic outlook challenging at best, given these companies have not been sold in the past three years, it is unlikely these final positions will be sold quickly, unless Link is prepared to accept a discount to the current valuation.

“Winding up the fund was always likely to be a challenge and it has certainly proven to be the case. With recent news of the FCA looking at fining Link for its failure to manage liquidity effectively, it feels like events are moving forward a little quicker than before. Investors will be glad to see this after such a long, drawn out process, although it seems there are still plenty more twists and turns in this sorry saga.”

Three years on from the Woodford saga

Three years ago, the flagship Woodford Equity Income fund, run by former star manager Neil Woodford, was suspended as it couldn’t meet a surge in redemption requests following a period of poor performance.

The suspension of the £3bn fund was originally due to be lifted and the fund re-opened in December 2019. But in October 2019, the fund’s administrators confirmed the fund would be wound up with cash returned to customers “as soon as possible”.

Payments from the sale of assets from the renamed LF Equity Income fund came in January 2020 and so far, four payments have been made.

Meanwhile, the city watchdog, the Financial Conduct Authority (FCA) announced Link Fund Solutions could be hit with a £306m penalty over its “failings in managing the liquidity” of the fund.

However, the £306m redress for thousands of investors who lost money – some their life savings – is “nowhere near enough” to compensate them, Meriel Hodgson-Teall, solicitor at Leigh Day said.

This is one of two leading legal firms (the other is Harcus Parker) which have joined forces to act on behalf of investors to bring a claim against Link Fund Solutions.

In June 2022, they filed a joint application at the High Court for a Group Litigation Order (GLO) against LFS which detailed claimants’ allegations against the administrator.

It is expected that the application will be heard in the High Court in December 2022. Leigh Day currently represents over 13,000 individuals in the group claim.

In the meantime, investors have one of three options when it comes to complaining and seeking redress.