Woodford investors find out size of losses on first payment

Investors in the LF Woodford Equity Income fund have been notified how much they will receive in a first payment on 30 January.

Investors in the LF Woodford Equity Income fund have had a first indication of the sizeable capital losses they will stomach, following the announcement of the fund’s first capital distribution.  

According to a letter to investors, Link Fund Solutions, the fund’s administrator, has now formally moved to wind up the fund and investors today (28 January 2020) were notified how much they will receive in a first payment on 30 January.

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Investors will be paid an amount based on the number of units or shares they have. Those holding the fund through platforms will receive payment a few days later.

In addition, in a separate letter to investors it was announced the costs associated with winding up the fund will amount to around £10 million. 

As the table below shows, investors will receive between 46p and 58p per unit, depending on the share class they hold.

These figures are significantly below both the initial unit price of the fund at launch (100p) and the current unit price (around 76p per share, depending on the share class).

On the basis of the A Sterling Accumulation share class giving an investor almost 58p per unit and the unit currently being 78p, investors will receive roughly 74% of the fund’s current value in this first capital distribution.

That leaves around 26% of the fund’s current value to be returned to investors. However, it is not clear how much more investors will end up receiving. 

The capital returned to shareholders has come from the sale of the fund’s liquid assets, which asset manager BlackRock was tasked with. That was the easy part.

The remaining part of the portfolio is in illiquid, unlisted assets and have seemingly yet to be sold. Park Hill, the private equity specialist, was tasked with the sale of the unlisted businesses.

Information of the progress of these sales has been notably lacking. For example, a letter from Link to investors in December 2019 noted that while BlackRock had sold the majority of its portion of the portfolio, it was “unable to confirm when [the unlisted] assets will be sold”.

According to Ryan Hughes, head of active portfolios at AJ Bell: “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.”

The fund initially suspended trading in June 2019 as it was unable to meet a wave of shareholder redemptions. While the fund was due to re-open in December, Link announced in October that it had decided to wind up the fund and start the process of returning capital to investors.