Woodford investors to get as little as 46p per share from wrecked fund

Neil Woodford: There is widespread anger over his management of the equity income fund, and his decision to take some £8.6m in fees between its suspension in June and the decision to wind it up

Investors in Neil Woodford’s collapsed equity income fund have been told today what cash has been salvaged from some of the underlying assets, with payouts due to begin on Thursday.

They will receive between 46.3633p and 58.9936p per share, depending what version or ‘share class’ of the fund they held.

Each share was worth £1 when launched by the fund, but their value had fallen substantially by the time the fund was frozen at the start of June 2019.

People who hold the Woodford fund on an investing platform or in a pension will be paid direct into their account or fund, but Link says platforms might take a few extra days to process payments, after they are made on 30 January. 

The money comes from a sell-off of the liquid part of the portfolio carried out by US investment bank BlackRock and is believed to represent about 70 per cent of the fund at its present value. 

Earlier this month, Link said that £1.9billion had been raised from the sale of 63 per cent of the fund at that point. 

The task of offloading the much harder to sell, more illiquid assets is being handled by specialists at Park Hill, and Link offered no update today on its progress or news on when future payments would be issued.

Hundreds of thousands of people face losses following the collapse of the fund, and are waiting to get some of their money back.

Today, Labour’s shadow Chancellor John McDonnell repeated his call for a delay in the appointment of Andrew Bailey as governor of the Bank of England, so his role in the debacle while boss of the Financial Conduct Authority can be investigated first. 

Source: Link Asset Services. See below for an explanation of 'share classes' and the letters attached to them

Source: Link Asset Services. See below for an explanation of ‘share classes’ and the letters attached to them

Link said in its latest bulletin to them: ‘This first capital distribution will be reflected in the net asset value of the fund on the payment date, being on or around 30 January 2020.

Why are investors getting different sums depending on what share class they held? 

Share classes are simply different versions of the same fund.

We explain how they work and how to decode the abbreviations tagged to them here. 

‘Accumulation’ means that any dividends are reinvested in the fund, and ‘income’ means they are paid out to investors.

Hargreaves customers hold an exclusive ‘Z share class’ version of the Woodford fund, because it negotiated a special cut-rate deal with his fund management firm.

The ‘Z’ version of Woodford’s fund was cheaper than the ‘C share class’ version offered by rival fund brokers.

Tilney managing director Jason Hollands explains that the differing payouts for each Woodford share class reflect the level of fees people were paying.

So, Hargreaves customers are getting a slightly higher amount back because their charges were lower. 

You can work out how much you have lost on the sale of the liquid part of the fund portfolio, by taking the figure for your share class and multiplying by how many shares you have, and comparing with what you bought them for.

This is Money has a searchable database of individual funds which includes all their various share classes here.  

‘This means that the number of shares that you hold in the fund will remain the same but the price per share will reduce to reflect the value paid out by way of the first capital distribution of the fund on that date.

‘Link Fund Solutions Limited will write to you, under separate cover, with an explanation of how this first capital distribution has been calculated and to provide an update in relation to other matters concerning the winding up of the fund.’

There is widespread anger over Woodford’s management of the equity income fund, and his decision to take some £8.6million in fees between its suspension in June and the decision to wind it up.

Accounts for the 2017/18 year published earlier in January showed that Woodford and his business partner Craig Newman scooped £13.8million in dividends from their investment business while it was descending into crisis, with investors already fleeing funds. 

His smaller Woodford Income Focus fund has been taken over by Aberdeen Standard Investments, and Woodford Patient Capital Trust by Schroders Investment Management.

Labour’s John McDonnell has criticised the Government for not postponing the appointment of Bailey to the Bank of England, citing ‘the failure of the FCA to monitor investment fund suspensions’ during his time as chief executive of regulator.

He said today: ‘Many small investors who were simply seeking a secure investment for their pension have been hurt by the failure of Woodford.

‘This isn’t just about the failure of Woodford. More importantly it’s about the failure of the regulatory system and in particular the FCA. I repeat my call for a fully independent inquiry into this debacle including the role of the FCA.’ 

Jason Hollands, managing director of Tilney, says investors who bought the fund at its launch are down 21 per cent, and those who bought in June 2017 are down 43 per cent.

‘It’s a dreadful outcome. It shows the importance of continuing to monitor investments,’ he adds. 

Ryan Hughes, head of active portfolios at AJ Bell, says: ‘In some respects, today represents the first day of closure for investors who have suffered from the terrible performance of the Woodford Equity Income fund.

‘However, while this payment of the first tranche of the liquidated assets will be a relief for thousands of investors who have been trapped in the fund since June last year, there is still huge uncertainty around the money still stuck in illiquid assets.

‘This payment represents just over 70 per cent of the current fund value and has been raised from the sale of the liquid element of the portfolio.

‘Investors will be acutely aware that a large portion of their investment remains trapped in the illiquid, unquoted holdings that Park Hill are trying to sell. Selling the liquid holdings was the easy bit.

‘For Park Hill, it is a hugely challenging task to sell the illiquid holdings in a timely fashion and investors still remain in the dark as to how long they will have to wait for the remainder of their money, and importantly, how much they are actually likely to get back.’

Investors are understood to be considering legal action against online investment broker Hargreaves Lansdown, which has been heavily criticised for keeping the Woodford fund on its ‘best buy’ lists up until its suspension in June.

A third legal firm, Nelsons, has joined Leigh Day and Slater & Gordon to confirm it is exploring action against Hargreaves. 

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