Woodford Investment Management to close

21 November 2019

5 minute read

High profile fund manager Neil Woodford has announced that Woodford Investment Management is to close. We look at what this means for investors in the three Woodford funds.

Who's it for? All investors

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

What you’ll learn:

  • What led to the closure of Woodford Investment Management.
  • How long the Woodford Income Focus fund will be suspended for.
  • When investors are likely to get any money back.

Neil Woodford has announced the closure of his firm, Woodford Investment Management, but the uncertainty is far from over for investors in the three funds he managed.

Soon after it was announced that the flagship LF Woodford Equity Income fund would be wound up, Woodford, known for his so-called ‘contrarian’ approach to investing, said he had taken the “highly painful decision” to close Woodford Investment Management.1

We look at the background to the investment firm’s closure, and what it means for investors.

The background

Neil Woodford’s investment style was to focus on small, medium-sized and unquoted companies that he believed had the potential for profit.

Several of the investments in his flagship Equity Income fund, including online estate agent Purple Bricks and doorstep lender Provident Financial, performed poorly, prompting many investors to want out.

Meeting requests by investors for their money back proved difficult, however, as some of the companies invested in were illiquid and hard to sell, for example, those which weren’t listed on a public stock exchange.

Woodford and the fund's authorised corporate director Link Fund Solutions therefore took the decision to suspend the Equity Income Fund in June, with the aim that he would ‘reposition’ the fund’s holdings into investments which could be bought and sold more easily.

The suspension was expected to end in December, but Link decided that not enough progress had been made for it to re-open then, and that it would be in the best interests of investors for the fund to be wound up.

With Woodford Investment Management no longer receiving fees from the Equity Income fund, Woodford subsequently announced that he had taken the decision to close the business.

What this means for the three Woodford funds

Woodford Equity Income fund

The Woodford Equity Income fund is to be wound up, with the aim of returning investors’ money to them. Following approval from the regulator, the fund is likely to start winding up from 17 January 2020 and it will be suspended until then.

The fund is no longer managed by Neil Woodford and Link Fund Solutions has appointed two companies to manage the investments as the fund winds up. The name of the fund is expected to change from LF Woodford Equity Income fund to LF Equity Income fund.

As the fund sells assets, investors will be paid a share of the proceeds, but it is not yet known how much they will get back. The fund will continue to make these payments as more of the fund assets are sold, until it no longer holds any.

Find out more about the winding up of the Woodford Equity Income fund

Woodford Income Focus Fund

Having been suspended for an initial period of 28 days on 16 October, the administrators of the Woodford Income Focus fund announced a further 28-day suspension on 13 November. However, they have indicated that it may end sooner. They are looking at whether to appoint a new investment manager for the fund, or merge it with another fund. The administrators hope to make an announcement on this within 21 days. If a merger happens, existing shareholders would receive shares in the other fund in exchange for their existing holdings. We’ll let you know as soon as there’s any update.

The suspension means that investors can’t sell their holding of this fund or make any further investment in it. The aim of the suspension is to protect investors in case significant numbers rushed to cash in their investments, which would have made the fund a ‘forced seller’ of its assets.2

Woodford Patient Capital

The Woodford Patient Capital Trust has confirmed that Woodford will give up its role as Portfolio Manager of the trust after he has served a three-month notice period.

It has been announced the investment management group Schroders has been handed the management of the trust and is expected to take over the reins by the end of the year. On taking over, the trust will be rebranded as the Schroder UK Public Private Trust.

Despite the rebrand, the board of the trust said Schroders will manage the portfolio in line with its existing investment objective, targeting unquoted and quoted companies for the long-term. The fund will be managed using a team-based approach, focusing on sectors such as technology and healthcare. Investors in the trust are still able to trade as normal.

We’ll let Smart Investor customers in the Woodford funds know of any further significant changes or announcements that affect the funds.

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