Interactive Investor

Neil Woodford investors to receive third payment, but losses unclear

Woodford Equity Income investors to receive a third payout from the collapsed fund.

3rd August 2020 11:54

by Kyle Caldwell from interactive investor

Share on

Woodford Equity Income investors to receive a third payout from the collapsed fund, but the scale of losses are at this stage unclear. 

Investors in the stricken Woodford Equity Income fund have been informed that they will receive a third payment.

But, at this stage, it is unclear how much money investors will receive and indeed what the size of losses will be. In addition, the timing of the payment has not been spelled out.

In a letter, penned by the fund’s authorised corporate director Link Fund Solutions, investors were informed that Woodford Equity Income has around £58 million in cash to return to investors and that further share sales will be made over the next three weeks.

Investors will receive further letters, the first, which will be sent “on or around” 19 August, will detail the total amount of money that will be returned to investors in the third payment. In another letter, to be sent on or around 21 August, investors will be informed how much they are entitled to and when the payment will be made.

Following the third payment, Link notes that “further capital distributions will be made as and when suitable amounts of cash have been received”. 

In June, a deal was struck to sell 19 of the fund’s healthcare assets (both listed and unlisted businesses) in return for up to £223.9 million. The shares will be sold over the next six months.

Ian Cowie: buying gold and high yield on the cheap
Monthly income dries up for investment trusts, but ‘rainy day’ reserves deliver
FTSE 100: big risks for the main stock market index

How much money has been returned to investors?

Investors have so far received more than 75% of the assets from payouts made in January and March 2020.

The first payment to investors, which was made at the end of January, was £2.1 billion, which is equivalent to around three-quarters of the fund’s assets.

Investors were, and will continue to be, paid an amount that is based on the number of units or shares they hold. In the first payment, investors received between 46p and 58p per unit, depending on the share class. These figures were significantly below both the initial unit price of the fund at launch (100p) and the current unit price (around 76p per share, depending on the share class).

In March, another payment was made, with investors receiving 3.1p to 3.9p per share, depending on the share class. This second sell-off raised £143 million.

Currently, around £500 million of assets remain in the fund. 

- Want to buy and sell international shares? It’s easy to do. Here’s how
ii view: Amazon sales rocket
- 10 sector-beating stocks in an uncertain market

The background

More than a year ago in June 2019, the suspension of the LF Woodford Equity Income fund was described as a temporary move in order to give fund manager Neil Woodford “time and space” to raise cash to meet investor redemptions, which had risen to high levels following a period of poor performance.

Ordinarily, equity fund managers would sell down their holdings, but the issue that exacerbated the problem for Woodford was a large weighting to illiquid investments in the form of unquoted shares, which are not easy to trade quickly.

In the months that followed, Woodford attempted to move the fund away from these illiquid holdings, but two months prior to its scheduled re-opening in December 2019, the fund administrator Link Funds Solutions stepped in and fired Woodford.

As a result, the fund was wound up and investor money (with a haircut of around 30% to 40%) was set to be returned to investors.

Link Funds Solutions appointed BlackRock and Park Hill to help sell the remainder of the assets, with the proceeds given to investors in a series of payouts.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Related Categories

Get more news and expert articles direct to your inbox