Administrators for Neil Woodford’s flagship investment fund this week gave details of the first repayments that will be made to investors after its collapse last year.
Link Fund Solutions told investors in the Woodford Equity Income Fund on Tuesday that they can expect to receive between 48.2p and 57.9p per share, depending on which class of share they held.
The Equity Income Fund held £2.9bn in assets when it imploded in June 2019. As the pace of investor withdrawals had accelerated in the prior months, it became apparent that much of the fund was tied up in illiquid, unquoted investments which are relatively difficult to sell off.
When the fund did not have enough cash to pay investors back, Mr Woodford suspended withdrawals, trapping 300,000 investors and sparking Europe’s biggest fund management crisis for a decade.
How much are investors losing?
Investors are receiving 74 per cent of the fund’s value on January 18 2020. The fund’s value has fallen nearly 20 per cent since it was gated on June 3 2019. According to AJ Bell, that represents a loss of approximately 40 per cent loss on the value at the moment of suspension. However, 26 per cent of that loss is represented by investments tied up in illiquid, unquoted companies, which have not yet been sold.
What’s going on with the illiquid holdings?
There is still enormous uncertainty over the tranche of illiquid assets tied up in the fund. These assets are being unwound and sold off by PJT Park Hill, a specialist adviser. The value of the illiquid holdings is not known, partly because Link, which is responsible for pricing them, has not broken down valuations by quoted and unquoted companies.
However, there are clues that the unquoted shares have struggled. On January 17, Link noted a near 6 per cent drop in the value of the Equity Income Fund, which it attributed to an adjustment in the value of the unquoted portion of the fund’s holdings.
What should we look out for?
Now that Link has sold off the fund’s liquid holdings, that leaves the illiquid assets, which had accounted for 30 per cent of the fund. The value of these assets — the big mystery in the story of the fund’s demise — will be revealed at the next pricing event.
“It could be pretty ugly viewing but we will see happening with the illiquids,” says Ryan Hughes, head of active portfolios at AJ Bell. “You haven’t been able to work that out until now.”
When can investors expect payouts?
Investors should expect their money around January 30. However, those who invested through fund platforms may have to wait longer, as platforms process the payments.
Link has yet to give an update from Park Hill on when the illiquid investments will be wound down. Advisers say this is likely to take months, rather than weeks.
“No update means little progress,” says Mr Hughes. “We are many months away from having this whole fund wound up yet.”
Investors also expect to find out on Wednesday how much they will be charged by the businesses hired to close down the fund, such as Grant Thornton, Park Hill, Northern Trust and Link Fund Solutions.