Hundreds of thousands of investors trapped in Neil Woodford’s failed flagship fund face losses of at least a fifth on the bulk of their holdings following Europe’s biggest investment scandal for a decade.
On Tuesday the fund’s administrator Link Fund Solutions informed investors of the initial repayment they would receive, following the disposal of the easiest-to-sell portion of the fund, which was mostly made up of large and medium-sized listed companies.
At its peak in 2017 the Woodford Equity Income fund managed more than £10bn. Assets dropped to £3.8bn at the end of May, before redemptions were suspended, and stood at £2.9bn on January 27.
Based on the fund’s value when it was suspended, the latest payment to investors crystallises losses of at least 20 per cent. More losses are expected as the portfolio continues to be unwound.
Link published a letter on its website on Tuesday saying investors would receive between 46.3p and 58.9p for each share they owned in the fund, depending on the class of shares they held. The initial repayment is due this week and corresponds to three-quarters of the assets in the fund, which have been sold by BlackRock.
“In some respects, today represents the first day of closure for investors who have suffered from the terrible performance of the Woodford Equity Income fund,” said Ryan Hughes, head of active portfolios at AJ Bell, a wealth manager.
“However, while this payment of the first tranche of the liquidated assets will be a relief for thousands of investors who have been trapped in the fund since June last year, there is still huge uncertainty around the money still stuck in illiquid assets.”
More than 300,000 UK savers have been trapped in the now £2.9bn fund since it was suspended in June. The suspension led to the dramatic collapse of the investment empire of Mr Woodford, Britain’s best-known fund manager, and caused a crisis of confidence among the UK’s £7.7tn fund management industry.
From 2017 Mr Woodford’s flagship fund was hit by a tide of investor redemptions after clients sought to pull their money following a long period of underperformance. In order to pay back fleeing investors, the stockpicker was forced to sell his stakes in blue-chip companies, leaving a greater proportion of the fund in hard-to-sell assets.
This part of the portfolio, consisting of unquoted companies and large stakes in small listed businesses, will be disposed of by Paul Taubman’s PJT Partners, a boutique bank.
Link said investors in the fund were due to receive a letter in the post on Tuesday that would set out how much of their own savings they will receive in the first repayment, which is planned to take place on Thursday.
Yet one investor in the fund, who made the investment through a wealth manager, told the Financial Times he had not received the letter by mid-morning on Tuesday. “On one hand, it’s deeply disappointing to face further delays in getting my money back; on the other, it’s not at all surprising,” he said.
“For me it’s only a few thousand pounds — if it was my life savings, I would be up in arms.”
Investors are due to discover on Wednesday how much they have been charged in fees by the various businesses employed to wind up the fund, including Link, the authorised corporate director; Northern Trust, the depositary, and Grant Thornton, the auditor.
Also on Tuesday, Rutherford Health, a cancer therapy company in which Mr Woodford was a big investor, called in a £7.5m cash commitment from the equity income fund. Mr Woodford, who invested in the business across his three main funds, agreed to buy Rutherford shares for £80m in cash when the company floated last year.
The fund was forced to plough £15m into the company, formerly known as Proton Partners, in December. The final £10m of the original commitment is outstanding.
Equity Income now owns 26.8 per cent of the business, but is restricted to just 19.5 per cent of its voting rights.
This month it was revealed that Mr Woodford and Craig Newman, his business partner, extracted £13.8m in dividends from the business in its final financial year, bringing the total reaped by the pair since 2014 to £112m.
The duo recently travelled to China in an attempt to court interest for a new business, after seeing UK investors desert the once-feted fund manager in droves.