Neil Woodford has been fired as the manager of his flagship Woodford Equity Income fund (WEIF), which will now be wound up
The fund was been suspended in June after it was unable return money to investors attempting to leave the fund due to its number of unlisted company holdings.
The suspension period was supposed to allow the fund to reposition its portfolio away from these illiquid holdings and was due to re-open in December.
However, the fund’s administrator, Link Fund Solutions (LFS) has now taken the decision to not re-open the fund, claiming that it is not convinced this repositioning be completed by December.
In a letter to investors, LFS said: “Whilst progress has been made in relation to repositioning the fund’s portfolio, this has unfortunately not been sufficient to allow reasonable certainty as to when the repositioning would be fully achieved, and the fund could be re-opened.”
LFS says that winding up the fund now will allow money to be returned to investors in a quicker and more orderly fashion.
LFS has appointed BlackRock and Park Hill to help sell the remainder of the fund’s assets, with the proceeds given to investors in the fund over a series of pay-outs.
The first distribution expected to happen by the end of January 2020.
Investors, however, are likely to receive significantly less back than their original investment.
LFS announced it has waived fees on the fund since the June suspension, which had long been a source of contention.
As recently as the end of September Mr Woodford apologised again but refused to back down on taking fees from investors trapped in the fund.
While LFS will not take any fees during the winding up period, brokerage and legal costs associated with selling the fund’s assets will be borne by the fund.
The decision to liquidate the fund was not welcomed by now former manager Woodford, who said in a statement: “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.”
The Financial Conduct Authority has said it “welcomes the removal of uncertainty that LFS’s decision provides.”
Lee Wild, head of equity strategy at interactive investor (Moneywise's parent company), says: “Neil Woodford and his team built a funds empire based on performance at Invesco. This is a brutal warning that, much like in football management, if you don’t perform you lose your job.
"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.”
This article first appeared on our sister website Money Observer
I really don't see how the FCA can justify its comment that it “welcomes the removal of uncertainty that LFS’s decision provides.” The fact that the fund's assets will now be sold off in a hurry strikes me as meaning the uncertainty regarding what proceeds that might achieve is now greater than it had been before. This move may mean investors will receive a payout sooner, but the amount of that payout is as uncertain as ever -- maybe even more so -- and nobody can say how long it will take to liquidate all of the assets.