Small investors face £1bn hit from Neil Woodford’s fall

Neil Woodford

Investors trapped in Neil Woodford’s stricken investment fund face losses of at least £1 billion from the liquidation of his portfolio.

Assets in the Equity Income Fund are valued at about £3 billion, but analysis by PJT Park Hill, one of the firms that is winding it down, shows that investors are expected to suffer losses of 32.5 per cent from its liquidation.

The forecast losses rise to 42.6 per cent, or almost £1.3 billion, in the worst-case scenario. These come on top of the 18 per cent losses suffered by investors between the fund’s launch five years ago and its liquidation last month.

The figures, first reported by Citywire, an investment website, deal a significant blow to the hundreds of thousands of trapped savers. Mr Woodford, 59, had attracted a loyal army of small investors during his 26 years at Invesco, where he generated stellar returns. When he left to set up his firm in 2014 investors flocked to his new business hoping that he would replicate his success.

However, savers who piled into his Equity Income Fund, the main open-ended vehicle run by Woodford Investment Management, are embroiled in one of the biggest scandals to grip the British investment industry. The assets in Equity Income peaked at £10.2 billion in May 2017, but then shrank as shareholdings went wrong and investors pulled out.

Link Fund Solutions, which handles the corporate governance of the fund, suspended withdrawals in June in response to fears that it might be crippled by redemptions.

Link had hoped to reopen the fund in December, but last month it decided to liquidate it instead. It sacked Mr Woodford as the fund’s manager, prompting him to close the firm. PJT Park Hill is selling the illiquid assets in the fund, which include stakes in unlisted companies, and Blackrock is disposing of the liquid investments.

The losses estimated by PJT Park Hill were forecast last month in an analysis that Link commissioned before dismissing Mr Woodford.

Woodford Investment Management had also drawn up estimates for the different outcomes for the frozen fund, it emerged yesterday. Under Woodford’s modelling, a 12-month wind-down would inflict losses of 35.7 per cent on investors. It also estimated that if the fund was allowed to reopen, savers could be hit by losses of 9.3 per cent in the event that two of its biggest unlisted technology investments were written down to zero.

Woodford’s analysis did not account for withdrawals that the fund was likely to suffer once the suspension was lifted. A spokesman for Mr Woodford’s firm declined to comment.

A Link spokesman said that the wind-down “involves the sale of the fund’s assets over a reasonable period of time. The aim is to avoid a ‘fire sale’, balancing the need to generate liquidity and the need to secure a reasonable value for the assets.”

When Mr Woodford announced the closure of his firm, he resigned as manager of his two remaining portfolios, the listed Patient Capital Trust, which has since announced that it will replace him with Schroders, and the £249 million open-ended Income Focus Fund, which was also frozen after he stepped down.

Link said yesterday that it had shortlisted investment firms that might either take over Income Focus or merge it with another fund, but warned that it could still be wound down.