A screw-up over the first payment from the Woodford Equity Income Fund as it goes into wind-down mode leaves investors that have been trapped in the fund for over half a year with even more uncertainty.
Link Fund Solutions told investors on Friday morning that the first distribution from the suspended fund would now take place on 30 January, 10 days later than the timetable it set out for trapped investors in December. Some 63% of the fund value has been liquidated, although this appears to be from the liquid portfolio, which Blackrock has been tasked with winding down.
Link blamed the delay on regulations that require investors to “retain exposure to the equity market for the entire period prior to the fund being wound up”. It also said the delay would minimise costs associated with liquidating a “significant” portion of the fund’s holdings in money market instruments.
Link was meant to be providing investors with certainty
AJ Bell head of active portfolios Ryan Hughes said investors had every right to be frustrated with the situation given the previous timetable was only communicated a month ago.
“When you’re setting out a plan for winding up a fund and the return of capital to investors, it’s absolutely critical that you get your get your dates right, because you’re basically leaving a period of uncertainty and trying to provide investors with certainty,” Hughes said.
“And to now say that, actually, you made a mistake on that. There could be investors that were relying on that money coming back on a certain day. That’s clearly not a good situation for those investors.”
The fact Link was not on top of relevant regulation when it set out the initial timetable was “odd”, he said.
It is not clear whether problems with accessing money market instruments, which are normally highly liquid, came from Link or Blackrock. Portfolio Adviser has contacted both companies for a response.
Link first received permission from the Financial Conduct Authority to wind down the Woodford Equity Income Fund on 15 October 2019. Under European regulation, it had to give investors three months’ notice of its decision meaning the first distribution could be paid out in mid-January at the earliest.
Blackrock makes £300m progress since December
The letter to investors also revealed £1.9bn of Woodford Equity Income fund holdings had now been sold from the liquid portfolio, representing 90% of the portfolio. That is £300m more than the last update in December when the timetable for the Woodford Equity Income distributions were initially set out.
Link said this represented 90% of the value of the liquid portfolio, which is managed by Blackrock, and 63% of the value of the fund. “We continue to work with Park Hill to explore opportunities for the sale of assets within Portfolio B,” Link said in the letter with reference to the illiquid assets in the fund.
It also blamed most underperformance in the fund on its revaluation of the illiquid portfolio since it announced it was winding down Neil Woodford’s fund.
“I think we can imply from the statement that it’s going to take a long time to get out the illiquid bit,” said Hughes. “I’m stating the obvious but we need to manage investor expectations.”
The lack of detail on disposals from the illiquid portfolio implied none, or very few, had taken place, he said.
