Link Fund Solutions Limited (“Link”), the corporate director of the LF Woodford Equity Income Fund, has announced that it intends to wind up the fund as soon as possible. In a letter to investors, Link said that the winding up would commence in January 2020.
Neil Woodford was once one of the UK’s best known investment managers, and his Woodford Equity Income Fund once boasted over £10 billion of assets under management. In June this year however, the fund was suspended by Link amid mounting losses and a growing number of investors asking to withdraw their money. Woodford was sacked from the fund in October.
The suspension was originally set to last 28 days to allow the fund to reposition its investments, selling illiquid assets and buying more liquid investments which could be sold more easily to meet redemption requests. However, this process proved difficult. The suspension was extended, and was expected to end in December. Link has now announced that, in the best interests of all investors, the fund will not reopen, and will be wound up.
Link must now seek formal permission from the FCA to wind up the fund. Three months’ notice must be given to investors, so it is expected that the winding up will begin in mid-January 2020. Investments are to be sold over a reasonable period of time in order to maintain their value (avoiding a “fire sale”). The first distributions are likely to be made in late January 2020.
The FCA has been criticised for its handling of the Woodford crisis, and its supervision of the fund in the months leading up to its suspension. The FCA has now launched an investigation into the suspension of the fund.
Andrew Bailey, chief executive of the FCA, suggested in an interview in The Times that the fund’s collapse highlighted the problem of mixing retail and institutional investors in the same fund. The fund’s collapse was triggered by Kent County Council’s request to withdraw £250 million from the fund, which it did not have the liquidated holdings to meet due to the fund’s holding of large numbers of unlisted companies. The regulator has said that retail investors are unlikely to have appreciated this liquidity risk, and that existing rules were not sufficient. The FCA is now considering new measures to manage liquidity risk; imposing restrictions on investing in hard to trade assets and separate withdrawal conditions for large investors.