Woodford Equity Income wind-up shakes fund industry to its core
In a bitter blow to the savings industry, LF Woodford Equity Income Fund is to be wound up and monies returned to investors starting in January 2020.
Neil Woodford’s eponymous Woodford Investment Management is no longer running the fund, whose authorised corporate director Link Fund Solutions decided to wind-up the portfolio in defiance of Woodford himself: ‘This was Link’s decision and one I cannot accept, nor believe is in the long-term interests of LF Woodford Equity Income Fund investors’, he commented.
Woodford Investment Management is shutting down and resigning from all investment management arrangements, including the sister Woodford Income Focus Fund (BD9X6D5) and the Woodford Patient Capital Trust (WPCT). Dealing in Woodford income Focus has subsequently been suspended with immediate effect, meaning investors are now blocked from withdrawing their money. Link says during the suspension it will look at a range of options including appointing a new investment manager, folding it into a different fund or winding it up.
June’s gating of ‘WEIF’ followed material underperformance of the broader market and an escalation of redemptions from the strategy and was designed to give Woodford time to reposition the portfolio into more liquid investments.
However Link clearly lost faith the fallen Woodford could reopen the fund before the end of the year as planned.
WHEN WILL INVESTORS GET THEIR MONEY BACK?
On the hook for significant losses, investors were previously expecting to get their money back in December, but Link says it will now take a bit longer in order to avoid a fire-sale of less liquid assets. BlackRock has been appointed to sell the listed assets, while broker Park Hill will deal with the disposal of the illiquid assets.
Investors will get their first return of cash at the end of January 2020 when the more liquid assets have been sold. But the amount available for distribution to investors is unknown at the stage as it will depend on how quickly the assets can be sold at a fair price and it will be a while before investors get back all the money due to them.
ANOTHER TAXING QUESTION
Significantly, investors’ proceeds from the wind-up will be classified as a disposal of shares for capital gains tax purposes. Link has said this may give rise to a capital gains tax liability (link to investor letter) which has implications for those who hold the fund outside of a tax-efficient wrapper such as an ISA or a SIPP. ‘If you are in any doubt as to the taxation consequences of this action you should seek professional advice’, writes Link.