Woodford Investors Finally Get Some Money Back

First payment from the stricken equity income fund will be between 46.36p and 58.9p per share, depending on which share class investors held

28 January, 2020 | 11:35AM
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Investors trapped in the stricken Woodford Equity Income fund have been told how much they will receive back as the fund is wound up by Link.

Investors who have been stuck in the fund since it gated in June 2019 will finally be able to get some of their money back. This latest announcement has been eagerly anticipated by the 300,000-plus people who hold the fund – particularly as the date for the first repayment was pushed back from January 20 to January 30.

Depending on which share class an investor owns, they will receive between 46.36p and 58.9p per share on January 30, or a few days later if the fund was held through an investment platform. Despite a rally in the performance of many of its holdings after December's General Election, the fund is down around 25% since it suspended trading. 

There are five share classes for the fund, four of which provided accumulation or income options. Investors holding the Z accumulation share class will receive the most, at 58.99p per share, while those invested in the F accumulation fund will receive the least, or 46.36p per share. 

Adrian Lowcock, head of personal investing at Willis Owen, adds: "There will be subsequent tranches paid out to investors but it is not clear how many and when. The administrators are likely to avoid making too many small payments as there will be a cost to do so. They also need to ensure they have the cash to pay the administration and wind-up fees." Woodford share classes

The money paid out comes from the liquid part of the portfolio, which was invested in listed companies on the FTSE and have been sold. But investors will have to wait longer to get their money back from the portion of the porfolio invested in unquoted companies. Investors will retain the same number of shares but the value of these will be diluted to reflect this first payment. 

Thousands of these investors are still expected to take legal action against Woodford Investment Management and the fund platforms that sold his fund. Neil Woodford closed his boutique investment firm Woodford Investment Management in October but it was revealed last week that Neil Woodford and partner Craig Newman paid themselves nearly £14 million in dividends before the equity income fund was gated.

Wound Up

The Equity Income fund’s administrator, Link Fund Solutions (LFS), last year decided not to re-open the fund but to wind it up, with BlackRock charged with selling off the liquid part of the portfolio (about 70% of assets) and Park Hill Group hired to sell off the unquoted holdings. The more liquid shares, such as housebuilders Barratt and Taylor Wimpey, have been the first to be sold off, but many of fund's holdings were in smaller listed or start-up companies. It is unclear yet when investors are likely to receive the money back from selling off this part of the portfolio. 

Indeed, Ryan Hughes, head of active portfolios at AJ Bell, warns that the harder work is still to come. "This payment represents just over 70% of the current fund value and has been raised from the sale of the liquid element of the portfolio. Investors will be acutely aware that a large portion of their investment remains trapped in the illiquid, unquoted holdings that Park Hill are trying to sell. Selling the liquid holdings was the easy bit."

Lowcock adds: "Illiquid assets are hard to sell and some discretion is required to get the best possible price, making it hard for Link to communicate in detail." 

Woodford has previously spoken out against the decision to wind the fund up, insisting the porfolio was poised to perform well post-Brexit and performance could have been salvaged. However, it has since emerged that the fund had persistently breached liquidity rules and investors had grown frustrated with the fund's consistent underperformance. Woodford said last year: “This was Link’s decision and one I cannot accept, nor believe is in the long-term interests of Woodford Equity Income fund investors.”

Woodford Income Focus, a much smaller fund than the flagship Equity Income fund, which once held more than £10 billion of assets, was also gated but was taken over from December 31, 2019 by Aberdeen Standard Investments, and will re-open in February.

Meanwhile, Woodford's investment trust, Woodford Patient Capital, has been taken over by Schroders and is now known as Schroder UK Public Private (SUPP).

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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