One year on — what has happened since the Woodford saga began?

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One year on — what has happened since the Woodford saga began?
Neil Woodford, former fund manager at Woodford Investment Management

It has been 12 months since former-star fund manager Neil Woodford was forced to suspend his flagship Equity Income fund, a move that triggered a series of unfortunate events and ultimately led to the closure of his esteemed fund house.

His demise gripped the industry as onlookers were glued to the fall of the industry star, previously dubbed the man who could “not stop making money”.

A year on, there is still some £500m of investors’ cash stuck in the illiquid assets at the crux of the saga, with little indication of when these will be sold. Some commentators have argued investors may be trapped in the wound-down fund for years.

Since the fund closed its doors to dealing on June 3 last year, investors have lost 40 per cent of any remaining cash in the fund. By comparison, funds in the Investment Association’s UK All Companies Sector have lost an average of 9 per cent.

Investors had already seen a prolonged stint of underperformance from Mr Woodford in the years leading up to the fund’s suspension. From June 2017 to June 2019, the fund lost 24 per cent compared to a UK All Companies average of a positive 1.2 per cent return.

Most of the assets invested in the fund have now been returned after BlackRock and PJT Hill were appointed to sell-off the stocks within the fund in October last year.

Some 70 per cent of the assets were returned to investors in January, when they shared a £2.1bn payment, while a further £143m was paid out at the end of March.

The Woodford saga illuminated the issues of illiquid assets in open-ended funds. His Equity Income fund was suspended on June 3 last year after Kent County Council asked to pull all of the £260m it had invested in the portfolio through its workplace pension.

The fund had been running with outflows averaging £9m per working day in May but Mr Woodford's representatives had played down fears about the fund's liquidity, saying outflows had become moderate and that the fund manager remained as confident as ever that his strategy would pay off.

But when Kent County Council’s request arrived the fund did not have enough liquidity to meet the redemptions.

Unquoted assets

Ben Yearsley, investment consultant at Fairview Investing, said the saga had “clearly hardened the view” illiquid assets should not be in open-ended funds. He added: “They certainly should not be in daily dealing open-ended funds, and this should include property. Illiquid and daily dealing should not go together.”