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Woodford suspension leaves investors in limbo 3 years on

Photo of Ryan Hughes, head of investment research at AJ Bell.
  • Woodford Equity Income suspended 3 years ago on 3rd June 2019
  • Suspension originally due to be lifted and fund re-opened in Dec 2019
  • Valued at £3.5bn in 2019 and £2.9bn in Jan 2020 when capital began being repaid
  • £2.5bn paid out so far with investors still waiting for £140m to be returned 

 

Ryan Hughes (pictured), AJ Bell head of investment research, comments:

“The suspension of the £3.5bn Woodford Equity Income fund (now LF Equity Income Fund) shocked investors in June 2019. No one expected the sorry saga would still be unresolved three years later. Investors will rightly feel angry and frustrated that they still have money stuck in the fund, with £140m outstanding and no clear end in sight.

“Link have indicated that the winding up process may even run into 2023, dragging out the misery for investors. Over the past three years, investors have received four payments totalling £2.54bn (see table). But the last of these was back in December 2020, with Link clearly struggling to offload the nine highly-illiquid companies remaining – including the well-known Atom Bank – at a sensible price.

“Investors will doubtless feel Link and the FCA could have done better through this period. There is a delicate balance between winding up the fund and getting a fair price for the remaining assets. After three years I suspect many investors would prefer to draw a line under this, accept a lower price and move on. However, the furore that occurred when Link sold assets to Acacia Research for £224m – some of which were then quickly sold for huge profits – will no doubt have made them wary of accusations they’ve sold assets on the cheap.

“The protracted affair has highlighted the total unsuitability of illiquid assets in open-ended, daily traded funds. Thankfully one of the outcomes of these events is that other managers have removed such assets from their funds. Ripple effects have also reached the open-ended commercial property fund market, which could see fundamental changes to try and balance liquidity and accessibility.

“Ultimately, the fact that this saga has dragged on for so long has been damaging for the reputation of the whole industry. No doubt we will hear the familiar words ‘lessons will be learned’ once the final review is concluded by the FCA, but I suspect that will be of little comfort to the thousands of investors impacted and it will take a long time to regain the trust of these people.”

Source: Link Fund Solutions

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