Investors in the collapsed Woodford Equity Income fund will receive a small fifth distribution from Link Fund Solutions, though the value of the remaining assets has fallen again.
Link, which last month was given 14 days to respond to a fine of £50mln from the UK financial watchdog and an order to pay £306mln of compensation for investors over its role in the collapse of the Woodford fund, wrote a letter to investors in the fund saying a capital distribution of £20mln would be issued soon.
It also revealed that the net asset value (NAV) of the fund, which is now called LF Equity Income Fund, was just under £80mln as of 30 September 2022, down almost a third from £118.5mln in mid-June.
A plunge in the value of Benevolent AI, a drug discovery specialist that the fund’s former manager Neil Woodford backed heavily in 2018, is the main reason for the drop in NAV.
Benevolent AI, which is listed on the Euronext exchange, has fallen from €8 per share to €3.91 per share, Link noted, resulting in a £31.2mln nosedive for the value of the shares held in the fund.
“Because the fund now holds relatively few assets, and because some of the shareholdings (such as Benevolent AI) have a relatively large weighting compared to others, a change to the value of such assets will lead to a disproportionately large percentage increase or decrease in the fund’s NAV,” Link said.
The fund’s other stakes are in Atom Bank, Freevolt (previously named Drayson), Mafic, Nexeon, Origin, RM2 (LSE:RN2) and Rutherford.
Since Link gated the £3.7bn fund in June 2019, capital distributions have totalled £2.54bn before the current proposal, which would take the total to £2.56bn.
Yesterday was the deadline set by the Financial Conduct Authority (FCA), when it issued a warning notice to Link, including 14 days to respond to the £50mln fine and proposed compensation.
Link Fund Solutions, a subsidiary of Australia’s Link Group, was issued with the draft warning notice by the UK financial watchdog following its investigation into the downfall of the Woodford fund.
The FCA said the compensation figure was based on its “current view of LFS's failings in managing the liquidity" of the Woodford fund and "does not reflect any amount which may be owed to anyone else, including members of the fund, as a result of potential wrongdoing by other parties", which is possibly in relation to legal claims being made against Link.
Link Fund Solutions said it was considering “all options”, including settlement talks with the regulator, which could result in a discount to the fine, or challenging the warning notice, while parent Link Group said it “did not agree with” the FCA's findings and would not fund any fines or compensation from the wider group.
Talks between the FCA and Link are understood to be continuing.