The suspended Woodford Equity Income fund will be wound up and the cash returned to investors - a decision Neil Woodford has said is “not in the interests of investors.”
The fund was suspended in June after a wave of redemptions that ran at £9m every working day amid concerns about the fund's poor performance.
The fund’s administrators - Link - originally intended to re-open the fund in December and Mr Woodford has spent the past four months selling hundreds of millions of pounds of stock, much of it in unquoted or illiquid assets, and re-positioning the fund into FTSE 100 shares.
Mr Woodford insisted this was to improve liquidity, and did not represent a shift in his worldview.
But this morning Link called time on these efforts, announcing the process of closing the fund down would begin in January and that Mr Woodford's company had been fired as manager.
It said: "Over the last few months, a process had been underway to reposition the fund’s portfolio into more liquid assets. Link Fund Solutions had agreed with the depositary and Woodford Investment Management that it would seek to complete the repositioning by early December 2019, and that LFS would monitor progress to ensure that this date remained achievable.
"Furthermore, it was agreed that it would not be possible to lift the suspension and re-open the fund until the sale of the unlisted and less liquid assets was completed. Failure to complete this process before the re-opening of the fund would risk a further suspension.
"Whilst progress has been made in relation to repositioning the fund’s assets, this has unfortunately not been sufficient to allow reasonable certainty as to when the repositioning would be fully achieved and the fund could be re-opened.
"LFS has concluded that an orderly realisation of the fund’s assets allows the return of money through interim payments to investors more quickly than if the fund had remained suspended for a longer period of time."
In a letter to investors, Link wrote: “We recognise that this will come as a disappointment to some investors. However have concluded that the winding up of the Fund is now in the best interests of all investors.”
The fund will now be divided into two portions: a listed segment, portfolio A, and an unquoted segment, portfolio B.
BlackRock Advisers will manage portfolio A while PJT Partners will manage portfolio B. Both companies have been appointed with the sole objective of selling the holdings in their respective portfolios.
PJT was already working in this role with Woodford.
The fund name will change to LF Equity Income, to reflect the fact Mr Woodford is no longer involved.
The intention is to return cash to investors “at the earliest opportunity" - which is likely to be January.
In response Mr Woodford said: “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.”
The fund lost 12.5 per cent over the past three months, and is now £3bn in size, £700m lower than when the fund was suspended. In March 2017 the fund hit £10bn in size but was hit by redemptions and poor performance.
According to FE it has been the worst performing fund in its sector - the IA UK All Companies - across, one, three and five years.
Over the past five years it has lost 17.6 per cent, while its sector gained 41.5 per cent.
Mr Woodford continues to manage the Income Focus fund and the Patient Capital investment trust, although the board of the latter remain in discussions with other managers about replacing Woodford Investment Management.
Ben Yearsley, director at Shore Financial Planning, said: "In my view, this just shows that unquoted holdings shouldn't be held in open ended funds. The FCA should now look at this and go further than they went recently to ensure this can't happen again and essentially outlaw unlisted holdings from the open ended fund structure.
"From an investors perspective this is an unsatisfactory end, however with the level of redemptions anticipated this feels like the only solution to treat all investors fairly. Woodford IM isn't earning a fee from Patient Capital, the Focus fund has fallen sharply in assets and they will struggle raising any money going forwards. This feels like the end for Woodford as a stand-alone business."
david.thorpe@ft.com
