Link Fund Solutions is making a second payment to investors trapped in the fund formerly known as Woodford Equity Income later this month, but some fund selectors think the illiquid portfolio could take years to sell as volatility ravages markets.
In a letter to investors on Thursday the authorised corporate director said since the last update at the end of January, it had freed up a further £141.7m in the LF Equity Income fund which is expected to be paid to investors on 25 March.
The capital raised is equivalent to 19.9% of the fund’s assets.
Link said the latest sum will take the total paid back to investors to £2.3bn. It follows the first distribution on 31 January which represented about 75% of the fund’s net asset value.
The fund has been split into two portfolios, A and B, in order to sell the assets. Portfolio A contains liquid assets sold by Blackrock while portfolio B, with illiquid holdings, continues to be sold by PTJ Partners.
‘This will rumble into 2021’
AJ Bell head of active portfolios Ryan Hughes said the fact the update comes after a majority of portfolio A’s assets have been sold by Blackrock indicates PTJ Partners has had success in selling some of portfolio B which previously had no sales.
But he added with the latest distribution amount representing just 20% of the remaining assets, there’s still a long way to go to, especially as market conditions have become increasingly difficult.
“We’ve seen market conditions deteriorate considerably, meaning that selling any unlisted and illiquid assets is likely to become much harder,” he said.
Hughes added: “While the asset manager will balance the competing needs to sell assets at a good price versus the saga dragging on for years, it seems inevitable that this will rumble on into 2021.”
Legacy funding commitments adding to woes
On Wednesday LF Equity Income made an investment in Rutherford Health of nearly £10m as part of its legacy commitment to fund that business. This takes the fund’s holding in the company to 28.81%.
Willis Owen head of personal investing Adrian Lowcock said the fact that the fund is still obliged to make investments such as Rutherford is a clear indication of the challenges the administrators face.
“Being a forced seller when you own over a quarter of a business will make it exceptionally difficult to get a good price for the investment,” he said. “The already long and drawn out process is likely to continue, potentially for years.”
Remaining assets are less liquid
Link said it could not comment on a timeline of future payments beyond the details in the letter, adding further distributions will be made when suitable amounts of cash have been made from the sale of the remaining assets.
The letter said: “Investors should be aware that the assets that remain to be sold are the less liquid assets of the fund and disposing of these assets may take longer than was the case for the sales to date.”
Earlier this week, it was revealed that Neil Woodford and several colleagues from his defunct fund boutique has been in discussions with a handful of institutional investors and wealth managers to buy back a handful of his unquoted investments from Park Hill at a discounted price.
Accounting date changed
Investors will be notified on or around 20 March on the amount they will receive from the second capital distribution. The amount will be calculated on 18 March.
Link said the latest distribution will be reflected in the net asset value of the fund on 25 March, meaning the number of shares an investor holds will remain the same but the net asset value of the fund and the price per share will reduce.
Link also confirmed the schedule of income distributions from the fund and changed the annual accounting date from 31 December 2019 to 31 March 2020.
In addition to the first income distribution for the period to 31 December 2019, paid on 29 February, Link said the next one is due on 17 March for the period 1 January to 17 January.
