Neil Woodford's investment company, Woodford Asset Management, is lying in tatters today after its authorised corporate director Link Fund Solutions (LFS) announced that the suspended Woodford Equity Income Fund is to be wound up. The remainder of the funds will be returned to investors.
The Woodford Patient Capital Trust (WPCT), an investment trust which is still actively trading, was down another 8 per cent to 34p as worries grow that it will follow suit and wind itself down at fire-sale prices.
The WPCT was something that I dipped my toe into last week at 38.7p but decided to sell on Friday after it fell to 36p. Fortunate given today’s price action.
Woodford, suspended his flagship £4.3 billion ($5.4 billion) fund from trading in June 2019, after an increase in client redemptions made it impossible for him to keep the fund open to investor sales.
The fund’s large holdings in unlisted or illiquid assets have become the Achilles heel of Woodford’s strategy, meaning it was doomed as its underperformance versus its benchmarks made investors want to dump it in droves and at a speed that Woodford could not cope with.
Despite seeking to sell down his illiquid holdings and move into liquid stocks ahead of a planned December reopening of the fund, Link said the process was not going as planned., "Whilst progress has been made in relation to repositioning the Fund’s assets, this has unfortunately not been sufficient to allow reasonable certainty as to when the repositioning would be fully achieved and the Fund could be re-opened. LFS has concluded that an orderly realisation of the Fund’s assets allows the return of money through interim payments to investors more quickly than if the Fund had remained suspended for a longer period of time. As a result of the decision, Neil Woodford will cease to be the investment manager of the fund with immediate effect and the fund's assets will be split into two portfolios managed by others.”.
BlackRock Advisors will take control of the fund's listed assets whilst PJT Partners will continue selling the fund's highly illiquid assets.
The winding-up of the Equity Income fund will begin on January 17, 2020.
Woodford was defiant saying the decision by LFS was not in the interests of shareholders, but the news essentially ends his career in infamous circumstances, after spending over 30 years building his reputation at Perpetual, managing the income fund there.
What a disaster for investors in Woodford funds. What on earth was he thinking with his choice of investments? Illiquid, risky and then he repositions his fund into shares like IAG and BAT which have been battered since he bought them! Hopefully, the FCA will take some serious action after the dust settles as investors have lost bags of money in so-called low-medium risk investments. The days of illiquid investments in closed funds is at an end. High fees and disastrous returns, as I’ve said many times before, it’s often better to have your money in a low-cost passive ETF like Vanguard.