Money manager Neil Woodford’s stricken flagship £3.1bn fund is to be shut, with all money returned to investors and Woodford himself sacked from the fund bearing his own name.
Withdrawals from the Woodford Equity Income fund have been frozen since June in one of the biggest scandals in the City. Money manager Neil Woodford has been racing to sell investments and reposition the fund in a bid to save it.
But Link Fund Solutions, which administers the fund, said on Tuesday: “The decision has now been taken not to re-open the Fund and instead to wind it up as soon as practicable.”
Link said in a letter to investors that not enough progress has been made to stabilise the fund ahead of the planned reopening in December. The fund will be wound up in January, as investors must be given three months notice, and all money will be returned as soon as possible.
“We recognise that the winding up will come as a disappointment to some investors, but we believe that this course of action is now in the best interests of all investors,” Link director Karl Midl said in the letter to investors.
Neil Woodford has been fired as manager of the fund with immediate effect. His name will be taken off the fund as soon as possible and BlackRock will take charge of the bulk of assets.
Fall from grace
The closure of the fund continues the rapid fall from grace for Woodford, who was once seen as one of the best money managers in Britain. He was forced to suspend the Woodford Equity Income fund in June after a liquidity crunch. Woodford had invested in a high level of private businesses and was unable to sell the investments quick enough to meet investor demands for their cash back.
Financial Conduct Authority (FCA) chief executive Andrew Bailey said earlier this year that the money manager had “sailed close to the wind” with his conduct. The debacle has provoked an investigation by the FCA and the Treasury Select Committee has also probed the matter.
The FCA said on Tuesday it “welcomes the removal of uncertainty that LFS’s [Link Fund Solutions] decision provides.”
The fund’s closure is unlikely to satisfy investors, however. Woodford has continued to charge fees since the closure of the fund, earning an estimated £65,000-a-day. Woodford has argued that the fees are necessary given the active management involved in selling off investments but the move was widely seen as insensitive.
Link has waived its fees but warned on Tuesday that costs related to winding up the fund will be taken out of the proceeds of asset sales, meaning lower returns for investors.
The poor performance of the fund since its closure will also eat into investor returns. Link said last month that the Woodford Equity Income Fund had declined by 12.8% since its suspension, while the FTSE All-Share index rose by 4.2% over the same period. The fund was worth £3.7bn when it was gated in June but the fund was worth just £3.12bn by the end of August, according to Woodford.
“If assets are sold for lower prices, you will receive less from the winding-up process and this also may be less than you originally invested,” the FCA said on Tuesday.
Ryan Hughes, head of active portfolios at investment platform AJ Bell, said news of the closure would be “cold comfort for investors locked in the fund.”
The closure of the Woodford Equity Income fund also raises pressure on the board of the Woodford Patient Capital Trust (WPCT.L), the money manager’s listed investment vehicle. The Patient Capital Trust has also performed poorly this year, with three recent write-downs on its investment in less than a month. The trust’s board said at the end of last month that it was considering replacing Woodford as manager. Shares in the trust collapsed by 8.7% on Tuesday.
The company noted his dismissal from the Equity Income Fund in a statement on Tuesday and said: “As previously announced, the Board has been undertaking a review of the Company's management arrangements and will make a further announcement in due course.”
Oscar Williams-Grut is Yahoo Finance UK’s City correspondent. He covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.