Neil Woodford's £3.5bn flagship fund to be shut down

Pedro Gonçalves
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Neil Woodford's £3.5bn flagship fund to be shut down

Neil Woodford's flagship fund is to be shut down after administrators abandoned attempts to relaunch the frozen investment vehicle.

In a major humiliation for the UK's best-known stockpicker, Woodford has been removed as investment manager of the fund, which will be renamed.

The former star fund manager had planned to reopen the Woodford Equity Income Fund, but the administrator, Link Fund Solutions (LFS), said on Tuesday it was in the best interests of investors for it to be wound up.

This was Link’s decision and one I cannot accept, nor believe is in the long-term interests [of investors]"

 Woodford immediately hit back. "This was Link's decision and one I cannot accept, nor believe is in the long-term interests [of investors]," he said in a statement.

The decision by Link Fund Solutions is likely to spell the end of Woodford's 30-year career managing money for the public.

Link said: "After careful consideration, the decision has now been taken not to reopen the fund and instead to wind it up as soon as practicable. This is with a view to returning cash to investors at the earliest opportunity."

It added that attempts to sell off Woodford's investments in unlisted businesses had "not been sufficient to allow reasonable certainty" for when the fund would reopen.

Link has appointed BlackRock Advisors to sell the fund's listed assets, and Park Hill to dispose of the unlisted assets. The fund will be renamed "LF Equity Income Fund". The winding-up will begin on January 17 next year. Investors will not get any money back until mid-January at the earliest owing to financial rules and it is unclear how much of their original investment would be salvaged.

Withdrawals from the Woodford Equity Income Fund have been frozen since early June, after rising numbers of investors asked for their money to be returned.

There has been criticism that, in the meantime, Woodford continued to charge fund fees of about £65,000 a day to customers.

Woodford Patient Capital trust, of which Woodford Equity Income holds 10% of shares, saw its value tumble by 9.8% in the wake of the news. It was trading at just under 34p a share as of 11.30am, representing a 43% discount to NAV, according to Morningstar. 

Ryan Hughes, head of active portfolios at AJ Bell, said: "For the Woodford debacle to have any positive outcome it must now serve as a catalyst for the FCA to speed up its review of illiquid assets held in UCITs funds."

Darius McDermott, managing director of Chelsea Financial Services, said: "More clarity from Link is required and the regulator needs to be on the ball today, this week, this month, to make sure that investors don't get hurt any more than they have already.

"This action also makes Woodford a forced seller of all stocks - stocks that the market place and short-sellers are all aware of. It may well mean that less money is returned to investors, so the jury is still out on this one."

The Financial Conduct Authority, which has been criticised for not acting sooner over the Woodford crisis, said in a statement that it "welcomes the removal of uncertainty that LFS's decision provides".

LFS has waived its fee on the fund from the June suspension. 

 

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