The Woodford Equity Income fund is to be wound-up, with its beleagured manager, Neil Woodford, effectively sacked as manager.
Link Asset Services, which runs the fund on Woodford’s behalf, made the decision. The winding up process is expected to begin from January 17, with investors receiving their funds in instalments. Most will be looking at significant losses.
Link has previously advised that the fund would re-open December, but the company now confirmed this will not be the case.
Link said: “We recognise that this will come as a disappointment to some investors. However we have concluded that the winding up of the fund is now in the best interests of investors.”
The mandate to liquidate the assets held by the fund will be passed to BlackRock and Park Hill, and the Woodford name will be removed from the fund. It will now be known as the LF Equity Income Fund.
Link’s decision has been criticised by 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.”
This fund, which at its height was worth £10bn was suspended in June after poor investment returns and a surge in redemptions saw its value sink to £3.7bn.
AJ Bell’s head of active portfolios Ryan Hughes says: “Woodford has not managed to move out of his unlisted assets and into more liquid listed equities quickly enough to re-open the fund in December, meaning Link has determined it’s in the best interests of investors for the fund to close entirely.
“This announcement at least confirms the end to a sorry saga but this will be of cold comfort for investors locked in the fund.”
There has been significant criticism of Woodford for not waiving his management fee while these funds were suspended. Link has waived its free on the fund from the June suspension.
Investors now won’t be charged direct fees while the fund is being wound up. But Hughes says: “However, investors will still be incurring high costs for the winding up of the fund, particularly selling off the illiquid assets. These costs will be taken out any proceeds from the sale, so will eat into the money investors get back.”
Hughes adds: “While no mention is made of Woodford’s other funds, it now seems highly unlikely that he will remain in place as manager of the Patient Capital investment trust, with the board already looking at potential replacements. Woodford Income Focus has now fallen below £300m, having returned a loss of 20 per cent over the past year.”
Willis Owen head of personal investing Adrian Lowcock, adds: “We have seen the complete demise of the most famous fund manager the UK has seen for years.
“Investors knew the scenario was bad but the indication from Woodford thus far had been that the fund would reopen. Sadly many people will be looking at significant losses.”
There were calls for the FCA to do more. Hughes says: “For the Woodford debacle to have any positive outcome it must now serve as a catalyst for the FCA to speed up its review of illiquid assets held in UCITs funds.”
Chelsea Financial Services managing director Darius McDermott adds: “More clarity from Link is required and the regulator needs to be on the ball today, this week, this month, to make sure that investors don’t get hurt any more than they have already.
“This action also makes the fund a forced seller of all stocks – stocks that the market place and short-sellers are all aware of. It may well mean that less money is returned to investors, so the jury is still out on this one.
“My other concern is what happens with Woodford Income Focus and its investors. It’s all a mess and, frankly, I don’t think this is a good outcome for investors at all.”