Neil Woodford investors pay dearly as liquidation payouts start
London — Investors trapped in Neil Woodford’s former flagship fund are finally getting some of their cash back, and getting to grips with the extent of their losses.
An initial payout of £2.1bn will be made this week, according to Link Fund Solutions, administrator of the LF Equity Income Fund. That is just over half of the £3.8bn of assets the fund had under management when it was frozen in early June. Investors may recover more if buyers can be found for the hard-to-sell assets still in the fund.
Woodford suspended his main fund because he couldn’t sell its holdings quickly enough to meet heavy redemption requests. In mid-October, Link decided to remove Woodford as manager and set the fund on course for liquidation. Woodford responded by announcing the closure of his investment firm.
The money for this first payout, which represents 75% of the fund’s current value, was raised from selling the fund’s most liquid securities, and recovering the remaining 25% will mean selling the thinly traded assets that led Woodford to suspend redemptions as he struggled to raise cash. That will not be a simple task, according to Ryan Hughes, head of active portfolios at AJ Bell.
“It is a hugely challenging task to sell the illiquid holdings in a timely fashion, and investors still remain in the dark as to how long they will have to wait for the remainder of their money, and importantly, how much they are actually likely to get back,” Hughes said in an e-mailed statement.
BlackRock was hired to sell the fund’s holdings of publicly listed securities, while private-equity specialist PJT Park Hill was tasked with finding buyers for the hard-to-sell assets.
Link has told investors individually how much money they will be receiving and to explain how the payment was calculated.
Woodford has faced criticism after it emerged that he shared in almost £14m in dividends months before his business collapsed. He also flew to China to test investor appetite for a potential comeback, holding exploratory meetings with investors interested in early-stage assets.