One year on from the suspension of the Woodford Equity Income fund and thousands of investors are still waiting to find out how much of their money they might get back.
The fund, which once had more than £10 billion of assets under management, is in the process of being wound up by its administrators Link Fund Solutions. Latest valuation figures suggests there is still around £558 million tied up in the fund, but some commentators say this last tranche of investments is “likely to be almost worthless”.
Adrian Lowcock, head of personal investing at Willis Owen, says: “As we reach the anniversary of the suspension of Woodford’s flagship fund, investors are wondering if they will ever get the rest of their money back.”
Fund Forced to Suspend
Former star manager Neil Woodford was forced to suspend trading in his fund in June 2019 when it was unable to meet investor redemptions. The proportion of the fund’s assets held in illiquid and unquoted holdings meant it was unable to sell enough shares to raise money to satisfy the growing stream of outflows from the fund. A prolonged period of underperformance saw many investors lose confidence in the fund.
Woodford originally vowed to get the portfolio back on track, but in October 2019 it was confirmed that he would close the fund and look to return money to investors. But the process has taken longer than many investors anticipated and millions of pounds are still locked in the fund.
His investment trust, Woodford Patient Capital, was taken over by Schroders and renamed the Schroder UK Public Private Trust (SUPP) while his smaller Woodford Income Focus fund was taken on by Aberdeen Standard.
The Equity Income portfolio was split in two; Link was charged with offloading the more liquid portion while the task of selling the fund’s illiquid assets was given to Park Hill.
Investors Still Waiting
Investors received the first payment from the fund in January, receiving back between 46.36p and 58.99p per unit of the fund they held, depending in which share class they had invested. The payment totalled £2.12 billion. A second payment was made in March, with a further £143.2 million paid back to investors, who received between 3.12p and 3.97p per unit held.
But the sale of the illiquid portion of the portfolio has proved problematic and investors are still waiting to hear when they will receive the last of their money back.
Lowcock says: “These investments were hard to sell in 2019 but now in 2020, with the UK facing the deepest recession in history along with the rest of the world, that outlook has worsened.”
He adds that investors may have to brace themselves for the worst: “Holders of the fund may find that the remaining investments are almost worthless, and they may not get much back after costs on any further disposals by the fund.”
What Should I do Next?
Investors who have lost confidence after their experience with the Woodford Equity Income fund might be tempted to stash their money in cash to avoid a repeat of the episode. But Morningstar analyst Jonathan Miller points out that this was "a bit of a one-off".
Investors looking for alternative equity income fund options should do their research to find out exactly what the fund is investing in as well and avoid holding any illiquid assets in an open-ended fund.
Miller says it's important to find out how much support the fund manager has from his investment and analyst team, to avoid mistakes coming from the so-called star fund manager culture. He says: "When you look at smaller investment firms, we want to find out more about the processes, who looks after the operations and risk. Too much say from the 'star fund manager' we don't think is good."
