Around 300,000 investors who backed stock picker Neil Woodford’s flagship fund are set to finally receive some money back from the frozen fund.
Administrators Link Fund Solutions said in a letter sent to investors on Tuesday that the first capital distributions from the Equity Income Fund would be made this week. The Fund has been frozen since last June and Link decided to shut it in October after Woodford’s investment business collapsed.
Investors will get cash back “on or around 30 January”, Link said, and the distributions represent around 74% of the fund’s current £2.8bn ($3.64bn) value. £10bn was invested in the Equity Income Fund at its peak but it was worth just £3bn by the time administrators took the decision to shut the fund.
“Today represents the first day of closure for investors who have suffered from the terrible performance of the Woodford Equity Income fund,” said Ryan Hughes, head of active portfolios at stockbroker AJ Bell.
Investors were trapped in Neil Woodford’s Equity Income Fund after the money manager was forced to suspend withdrawals last June. It came after a surge in investors pulling money that left Woodford unable to sell investments quickly enough to meet redemptions.
The suspension triggered a four-month crisis that ended in the collapse of Woodford’s investment business. His reputation as one of Britain’s most skilful stock pickers has been left in tatters.
Hughes warned that investors were still “in the dark” about the remaining 26% of the fund, which is made up of unlisted investments that are harder to sell.
“While this payment of the first tranche of the liquidated assets will be a relief for thousands of investors who have been trapped in the fund since June last year, there is still huge uncertainty around the money still stuck in illiquid assets,” Hughes said.
“Investors will be acutely aware that a large portion of their investment remains trapped in the illiquid, unquoted holdings that Park Hill are trying to sell.”
John McDonnell, the UK’s Shadow Chancellor, repeated his calls for a full independent inquiry into the collapse of Woodford’s investment businesses and the role of the regulator.
“This isn't just about the failure of Woodford,” Labour’s McDonnell said. “More importantly it's about the failure of the regulatory system and in particular the FCA.”
The regulator has been accused of failing to act quick enough despite being aware of potential problems brewing at Woodford’s business. The debacle, and issues around mini-bonds, have overshadowed the appointment of Financial Conduct Authority (FCA) chief executive Andrew Bailey as the next Bank of England governor.
“Until we have the results of such an inquiry I have recommended to the Chancellor that it is only proper that he delays the installation of Mr Bailey as the Governor of the Bank of England,” McDonnell said.