Interactive Investor

Neil Woodford sacked, but investor cash remains trapped

15th October 2019 10:49

Jemma Jackson from interactive investor


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Stuck in his flagship fund since June, Woodford's exit provides little near-term relief for investors.

The news that Link Fund Solutions has decided to wind up Woodford Equity Income Fund ends months of speculation for unit holders. But with the time horizon for returning money to them unclear – initial distributions are expected to commence in January 2020 – the uncertainty is far from over. The manager may well have been sent off the pitch, but investors are still stuck in the stands.

It also highlights that the authorised corporate director of funds can have more influence than is often thought – should we see these powers being flexed more often?

Lee Wild, Head of Equity Strategy, interactive investor, says: "Neil Woodford and his team built a funds empire based on performance at Invesco. This is a brutal warning that, much like in football management, if you don't perform you lose your job. It happens in the City every day of the week, but Woodford is easily the most high-profile victim in years. 

"Yet it is investors in the fund who are feeling the real pain from the side-lines. Woodford may have been sent off the pitch, but investors are still stuck in the stands. Uncertainty remains as to how long they will have to wait for what's left of the fund to be returned to them – they will have to watch this sorry saga play on for some time yet."

Rebecca O'Keeffe, Head of Investment, interactive investor, says: "Once again this raises the spectre of liquidity – there's no telling how long unit holders will have to wait before they get their money back from the sale of the unquoted businesses.

"It's another lesson, were it needed, that illiquid assets and the open-ended structure do not make good team mates. But it also raises another fundamental issue at a governance level: whilst we have seen investment trust boards choose to liquidate funds and return cash to shareholders, clearly authorised corporate directors of funds also have more flexibility than is often thought. It would be good to see authorised corporate directors in general being more proactive, and perhaps long before a fund ends up with a red card. This move will also put further pressure on the Board of Woodford Patient Capital (LSE:WPCT) to take affirmative action."

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.

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