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Woodford investors to get money back

30 January 2020

5 minute read

Thousands of investors whose money has been trapped in the suspended Woodford Equity Income Fund are set to receive their first payout.

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:

  • Latest update for investors with money trapped in the LF Equity Income Fund, formerly Woodford Equity Income
  • Why investors aren’t getting all of their money back now
  • What led to the closure of Woodford Investment Management.

Having not been able to access their investment for seven months, investors of the suspended Woodford Equity Income fund – now the LF Equity Income Fund - are starting to receive some of their money back.

Link Fund Solutions announced earlier this week, that investors would start to receive their first payouts from 30 January. They have previously said that this payment will be around 75% of the value of the clients' overall investment in the fund. Further payments are expected over the coming months as more of the fund’s holdings are sold, but no date for these has been given yet.

How will money be paid?

Link Fund Solutions this week confirmed how much investors will receive back in the first ‘Capital Distribution’. The money will be paid out on 30 January, although if you hold your investment via a broker or platform it may take a few days to reach you. We’ll arrange payment as quickly as possible so Smart Investor customers should receive their payments from 30 January.

Why aren’t investors getting all their money back now?

Following the closure of Woodford Investment Management in November 2019, responsibility of managing the fund was taken on by two companies: BlackRock and PJT Park Hill.

BlackRock had responsibility for selling the more liquid shares that the fund had invested in – these are the shares that are relatively easy to sell because they’re companies listed on the stock market and regularly traded. And it’s the cash from the sale of these that is now being returned to investors.

However, the fund also invested in unlisted companies, and the sale of these assets is being managed by PJT Park Hill, experts in private equity. By their nature, shares in unlisted companies are harder to sell than those listed on a stock market which is why it’s taking longer to find buyers for these holdings. PJT Park Hill will also be trying to achieve the best price possible to minimise the losses faced by investors in the LF Equity Income Fund – the fund’s value has already fallen about 21% since it was suspended last June.

Link Fund Solutions hasn’t given any indication of how long this could take, so it is not known when further payments will be made.

How did it all go so wrong?

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 2019, 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.

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The value of investments can fall as well as rise. You may not get back what you invest. We don’t offer personal financial advice so if you’re not sure about investing, seek independent advice. Tax rules can change and their effects vary depending on your individual circumstances.

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