Investors in the Woodford Equity Income fund face a long wait to get the final chunk of their cash back, according to a range of industry analysts.
The fund, which has since been renamed the LF Equity Income fund, is being wound down by its authorised corporate director (ACD) Link.
Link hired US fundhouse BlackRock to sell the more liquid stocks which are quoted on stock markets. It is from the proceeds of these sales that investors receive their first payment from the suspended fund.
Link also hired PJT Park Hill, with a remit to dispose of the less liquid and unquoted holdings for further distributions.
But Ryan Hughes, head of active portfolios at AJ Bell, said given the size of the payments, it is likely that PJT Park Hill “have not made much progress in selling off the unquoted holdings. On that basis, it will certainly be months, and it could run to years, before investors get their cash back.”
The battle to liquidate the fund has been further complicated by the disclosure from Link that it has been contractually obliged to invest £22m of the cash raised so far into a business called Rutherford Health. This is a long-standing, and poorly performing, investment in the Woodford fund.
Woodford Investment Management made the commitment to invest the extra cash when Proton Partners listed on the stock exchange in February 2019.
Rutherford Health trades on the relatively illiquid Next Stock Exchange.
The extra investment amounts to £22m, and means the fund owns over 20 per cent of the company. An additional liquidity issue is that the Schroders UK Public Private Trust, which used to be known as the Woodford Patient Capital trust, is also a shareholder in the company due to Mr Woodford having made the investment.
The Patient Capital investment trust invested £35m of extra cash into the company in 2019.
Jason Hollands, managing director for business development at wealth manager Tilney, said: “The residual assets relate to the B portfolio of illiquid holdings which includes unquoted companies. Fully exiting this stuff could take some time; months for sure; possibly years.
"That’s far from ideal for fund investors but it’s also not good for these businesses. Early-stage companies are cash hungry and can need multiple rounds of following funding from supportive shareholders to get them to the next stage.
"That doesn’t exactly fit the profile of a neutered investment fund in wind-down. If an investor isn’t able to participate in follow-on fund raising, they may ultimately get diluted.”
Link declined to comment for this story.
What do you think about the issues raised by this story? Email us on firstname.lastname@example.org to let us know.