Dismantling Neil Woodford's Equity Income fund could cost investors trapped in it an additional £10m, its administrator has revealed.
In a letter to investors, sent yesterday (January 29), the fund's administrators Link Fund Solutions said £10.3m had been put aside for or already spent on transaction, brokerage, legal and audit fees involved in the fund's closure.
Nearly £5m of this has gone towards costs already accrued from October 15, 2019 — when it was announced the fund would be wound down — while £5.3m has been provisionally set aside for future costs.
It looks as if investors will be suffering around £10m of fees and costs to wind up the fund which will be seen as another kick in the teeth for investors who have already seen substantial losses on their investments"
Link Fund Solutions said that just over £2.1bn will be distributed to investors in the first cash return since withdrawals from the fund were frozen almost eight months ago. However, this figure is after costs and other provisions that have reduced the amount available for investors.
Earlier this week investors were told the capital distribution will vary depending on share class, with investors receiving between 46.36p and 58.99p per share. This is a far cry from the £1 per share listing at launch in June 2014 and £1.38 a share at the peak of the flagship Woodford fund on 2 June 2017.
Ryan Hughes, head of active portfolios at AJ Bell, said: "It looks as if investors will be suffering around £10m of fees and costs to wind up the fund which will be seen as another kick in the teeth for investors who have already seen substantial losses on their investments.
"This update also gives an indication that Park Hill have made little progress on the selling down of the illiquid assets and, while unsurprising, this will be disappointing for investors. With no timescale being given on how long this element is likely to take, investors should brace themselves for a long wait for the remainder of their money.
"Link has also announced the fund price will now only be updated on a weekly basis rather than daily which reflects the reality that little will change in the portfolio and investors should watch the price carefully to see how it is impacted by any revaluation or sale of the remaining assets."
Another £22.5m has also been subtracted from the pot heading into investor's pockets as this sum is needed to honour previous investment pledges made by Woodford. These include young companies such as Rutherford Health, many of which have underperformed.
Fund administrators took the decision to wind up the Equity Income Fund rather than find a new manager. Around 300,000 investors have money in the fund.