Woodford Equity Income fund to be wound up

by Tom Bailey from Money Observer |

The City regulator "welcomes the removal of uncertainty" that the administrator's decision provides.

Neil Woodford has been fired as the manager of his flagship Woodford Equity Income fund, which will now be wound up.

The fund was suspended in June after it was unable to return money to investors attempting to leave the fund due to its number of unlisted company holdings. 

The suspension period was supposed to allow the fund to reposition its portfolio away from these illiquid holdings and was due to re-open in December.  

However, the fund's administrator, Link Fund Solutions (LFS), has now taken the decision to not re-open the fund, claiming that it is not convinced this repositioning will be completed by December.  

In a letter to investors, LFS said:

"Whilst progress has been made in relation to repositioning the fund's portfolio, 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 says that winding up the fund now will allow money to be returned to investors in a quicker and more orderly fashion. 

LFS has appointed BlackRock and Park Hill to help sell the remainder of the fund's assets, with the proceeds given to investors in the fund over a series of payouts. The first distribution is expected to happen by the end of January 2020. 

Investors, however, are likely to receive significantly less back than their original investment. 

LFS announced it has waived fees on the fund since the June suspension, which had long been a source of contention. While LFS will not take any fees during the winding up period, brokerage and legal costs associated with selling the fund's assets will be borne by the fund. 

The decision to liquidate the fund was not welcomed by now former manager Woodford, who said in a statement:

"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 Financial Conduct Authority has said it "welcomes the removal of uncertainty that LFS's decision provides".  

This article was originally published in our sister magazine Money Observer. Click here to subscribe.

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