Star UK fund manager Woodford forced to close embattled flagship fund
Britain's most famous fund manager has been forced to liquidate the flagship fund after a month-long suspension.
In a letter to investors on Tuesday morning, the administrators of the Woodford Equity Income Fund, run by star manager Neil Woodford, said the fund would be closed and cash returned to investors as early as possible.
Woodford has also been removed as an investment manager, with the fund set to rename.
The letter from administrators Link Fund Solutions (LFS) said that the decision came after a careful review of the fund and its holdings.
In a statement, Woodford said: "This was Link's decision and one I cannot accept, nor believe, is in the long-term interests of investors in LF Woodford Equity Income Fund."
Woodford Equity Income Fund was suspended in June following a poor performance and a sharp increase in investor redemptions, which took it from £ 1[ads1]0.2 billion ($ 12.9 billion) of managed assets on top to just £ 3.7 billion at the end of May 2019.
Woodford Equity Income has caused a 35.9% loss to investors over three years, while the Patient Capital investment trust he also runs has lost 59.21% over the same period. His smaller Income Focus fund has lost 20% over the past 12 months.
Since the suspension, efforts have been made to reposition the portfolio and unload significant portions of unlisted and illiquid assets. However, the letter to investors on Tuesday revealed that this "had not been sufficient to provide reasonable assurance as to when the repositioning would be fully achieved," which would allow the fund to reopen.
The Fund's assets are divided into two parts, the first of which includes listed assets that will be managed by BlackRock in preparation for liquidation.
The second section consists of unlisted and highly illiquid assets that will be sold further by LFS with assistance from specialist brokerage Park Hill.
Adrian Lowcock, head of personal investment on the investment platform Willis Owen, called the news "truly shocking."
"We have seen the complete demise of the most famous fund manager Britain has been watching for years," he said, adding that the collapse will "shake the fund's nourishment to its core."
What comes next for investors?
LFS has waived the fund's suspension from the June suspension and investors will not be charged direct fees while the fund is liquidated.
"However, investors will continue to incur high costs for liquidating the fund, in particular the sale of illiquid assets," explained Ryan Hughes, head of active portfolios on the investment platform AJ Bell. [19659002] "These costs will be deducted from any sales proceeds, so they will eat back the money the investors get back."
The settlement starts in January 2020, where investors will get their first increase in cash as more liquid assets should have been sold, Hughes explained, but it will take some time before they get their money back in full.
"The liquidity assessment conducted by the fund and passed on to the FCA (Financial Conduct Authority) in April of this year showed that one-third of the fund was in assets that would take six months to a year, or more, to liquidate," Hughes said.
"The portfolio has changed a bit since then, but it is unlikely to be a fast process."
