Woodford Equity Income fund will be wound up and its cash returned to investors, the fund’s corporate director said on Tuesday.
Link Fund Solutions said winding up the WEI fund was “in the best interests of investors” and the cash should be returned at the “earliest opportunity”.
Fund manager Neil Woodford said it “was Link’s decision and one I cannot accept” and that he did not believe it was “in the long-term interests” of the fund's investors.
Woodford has been working to "reposition" his flagship fund towards more liquid assets after it was gated in June when an extended period of poor performance led to a big rush of redemptions.
The repositioning had been designed to allow the WEI fund to reopen to investors by early December but Link said in a letter to investors that it has “not been sufficient to allow reasonable certainty as to when the repositioning would be fully achieved and the Fund could be re-opened”.
“LFS has concluded that an orderly realisation of the fund’s assets allows the return of money through interim payments to investors more quickly than if the fund had remained suspended for a longer period of time.”
Woodford removed as manager
Link said it expected the winding up of the fund to begin on 17 January but Woodford will not be in charge of the process, as his Woodford Investment Management firm has been sacked as the investment manager of the WEI fund with immediate effect.
The Woodford name will be wiped off too, with the vehicle renamed LF Equity Income Fund.
WIE’s assets will now be divided into two, with Blackrock appointed as "transition manager" for the listed assets, selling them and using the proceeds to purchase money market funds and FTSE 100 index instruments.
Link said this "will enable us to return part of investors’ cash as soon as possible once the fund begins the winding-up process".
Park Hill, which had previously been working as a specialist broker during the repositioning process, will continue to help with selling the unlisted and illiquid assets.
The liquidity assessment carried out by the fund in April showed that a third of the fund was in assets that would take at least six months to a year to liquidate.
'Cold comfort' for investors
“Today’s announcement at least confirms the end to a sorry saga but this will be of cold comfort for investors locked in the fund," said Ryan Hughes, head of active portfolios at investment platform AJ Bell.
He noted that while Link has waived its fee on the fund from the June suspension and there will be no direct fees charged while the fund is being wound up, 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," he said, adding that the winding-up is unlikely to be a quick process.
The board of the Woodford Patient Capital (LON:WPCT) investment trust put out a statement noting Link's move and reminding investors that it was still carrying out a "review of the company's management arrangements".
Shares in WPCT were down 8% to 34.5p by mid-morning.