Ignominy as Woodford is Removed and Flagship Fund to be Wound Down
As the fallout continues following the gating of his eponymous Equity Income Fund, one-time rock-star fund manager Neil Woodford has been sacked by its supervisor, Link Fund Solutions, and told that his fund will be wound down.
Link has managed the Woodford Equity Income Fund since it was closed to investors earlier this year and said liquidation is in the ‘best interests’ of investors, although it is unclear how much will be returned amid fears of heavy losses.
Mr Woodford immediately opposed the move, saying ‘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.’
‘We have seen the complete demise of the most famous fund manager the UK has seen for years’
Mr Woodford began a fire sale of assets when the fund was frozen in early June and had targeted December for it to reopen, but it failed to generate enough money to allow it to do so; Link said it hoped an ‘orderly realisation’ of the fund’s remaining assets would allow interim payments to be made to investors more quickly than if the fund had remained suspended.
Link plans to split the remaining portfolio into a ‘good fund’ of stock market listed and therefore easier to sell assets – Portfolio A, to be overseen by Blackrock Advisers, and a ‘bad fund’ of unlisted and highly illiquid listed assets – Portfolio B which includes holdings in small private companies, to be sold on by PJT Partners.
The fund will start to be officially wound up on Jan 17th 2020, where after investors can expect the first tranche of repayment from the good fund; illiquid assets will be sold over a longer time frame in order to prevent further losses.
Adrian Lowcock, head of personal investing at Willis Owen, told the Daily Telegraph that the decision to liquidate was ‘truly shocking’, adding: ‘We have seen the complete demise of the most famous fund manager the UK has seen for years. Investors knew the scenario was bad, but the indication from Woodford thus far had been that the fund would reopen.’
Mr Lowcock said the sudden turn of events would ‘shake the funds industry to the core,’ and that although investors would have to wait until next year to find out the value of their remaining investment, ‘many people will be looking at significant losses’.
‘shake the funds industry to the core’
It remains unclear whether Mr Woodford will refund investors the millions of pounds in management fees he has continued to charge since the gating, but his vehemence in contesting Link’s decision suggests low levels of contrition from a once feted City icon with seemingly little further to fall.
The demise of Mr Woodford’s flagship fund sent shockwaves through the industry, forcing the FCA to rule on funds holding illiquid assets, and also to investigate the role of ‘gatekeepers’ – brokers and platforms profiting from including certain funds on best-buy lists or within funds-of-funds in return for favourable terms.
Hargreaves Lansdown, the fund’s biggest backer whose clients have a £1.6bn locked in said ‘We are working closely with our clients to update them and keep them informed’.
Despite mounting speculation, the board of Woodford Patient Capital Trust, which the money manager also oversees, said it was aware of the decision to wind down the fund but made no comment on plans to remove Mr Woodford from his position with the trust; however it previously confirmed meetings with potential candidates to replace him although it claimed that no final decisions had been made.