Save, make, understand money

Experienced Investor

Woodford Equity Income fund a step closer to being wound up

Paloma Kubiak
Written By:
Paloma Kubiak

Investors trapped in disgraced Neil Woodford’s former Equity Income fund have been told a ‘significant portion’ of the fund’s remaining assets have been sold, bringing them closer to closure.

In a letter to investors, administrator Link Fund Solutions confirmed it had reached agreement with Acacia Research Corporation (Acacia) for the sale of 19 of the fund’s healthcare assets in return for up to £223.9m.

It added the sale of assets are from both the listed and the illiquid, unlisted investments.

To date, investors of the LF Equity Income fund (formerly LF Woodford Equity Income fund), have received payments of £2.3bn. An estimated £558m remained in the illiquid part of the portfolio at the end of May.

However, Link added that the fund’s current net asset value (NAV), as of 3 June 2020, including the sum from the Acacia sale, stands at £444.2m – more than £100m less than investors expected.

Karl Midl, managing director of Link Fund Solutions Limited, wrote: “It is possible that this NAV may vary as the market prices attributable to the fund’s remaining assets may change prior to them being sold.”

Link added that given the formalities associated with the sale of these assets, it could take up to six months for the sale to complete.

While it is unable to confirm the exact dates and amounts in respect of the further capital distribution, investors will receive an update letter no later than 29 July 2020.

‘Step closer to drawing a line under this sorry situation’

Ryan Hughes, head of active portfolios at investment platform AJ Bell, said the sale – which represents around half of the remaining assets by value – will be cautiously welcomed by investors as it moves them one step closer to being able to draw a line under this sorry situation.

He said: “However, there will no doubt be huge frustration at the valuation achieved by Park Hill, which has been managing this process, given the valuation may be lower than other offers that had reportedly been received and rejected previously. This highlights the very real problem of being a forced seller with all potential purchasers knowing that Park Hill and Link were in no position to try and push the price higher. At the end of the day with such illiquid stocks, these assets are only worth what someone is prepared to pay for them.

“Ultimately, the challenge for Link has been to find a balance between getting a fair price for the assets and the time taken to achieve this. Given one year has already passed since the initial suspension, I’m sure many investors will feel like this has dragged on long enough and it is time to finalise the winding up of the fund – even if it does mean taking yet another hit on the value of their original investment.”

The fall of Woodford

Former star manager Neil Woodford was forced to suspend his flagship fund on 3 June 2019 because he could not meet a surge in redemption requests following a period of poor performance.

In October 2019, the fund’s administrators confirmed the £3bn fund would be wound-up with cash returned to investors as soon as possible.

Trapped investors received the first tranche of payments from the sale of assets in January with a second lot in March.

Woodford, who was once considered the UK’s best stock picker, was sacked as manager of the fund, his other two funds were handed to new managers, and his firm, Woodford Investment Management, shut.