Investors trapped in Woodford Equity Income begin receiving part of their original investment cash back from 20 January 2020, according to the latest notice from the fund’s administrator, Link Asset Services.

But despite getting some much needed clarity on the troubling situation, investors still face an anxious wait to find out just how much of their original investment they are likely to receive. This won't be known until 13 January at the earliest.

A letter to investors, Link said that the winding up process will see sell all of the fund's assets in an ‘orderly’ manner, having received approval from City regulator the Financial Conduct Authority (FCA) for the fund's winding up.

The size of proceeds from asset sales will need to be carefully calculated, taking into account ‘any liabilities the fund owes, including costs associated with the winding up process, and contingent commitments the fund has in respect of its investments.’

Link said it anticipates making a series of payments to investors over the ‘coming months’. Receipt of proceeds from the winding up process will still be subject to capital gains tax, depending on personal circumstances.

SIGNIFICANT LOSSES

Holders of the fund should expect to receive significantly less money back once the process is complete, with an update on performance also provided in the letter.

In the period from 3 June when the fund was suspended to 10 December, the fund returned -18.6% compared to the 4.1% gain from its FTSE All Share Total Return benchmark.

From 15 October, when BlackRock and Park Hill were appointed as advisers to help with the sale of assets, the fund returned -3.2% compared to a 1.1% gain by the benchmark.

Link plans to write to investors again on 13 January when it will give them an update on the amount they will receive as part of the first payment from the winding up process.

After receiving the first payment on 20 January, the normal quarterly income distribution for the three months to 31 December is still expected to be paid on 28 February, with another income distribution on 17 March for the period between 1-18 January.

HARD GRAFT STARTS HERE

AJ Bell head of active portfolios Ryan Hughes said, ‘While the initial liquid assets have been sold, now the hard work begins.

‘Link’s letter indicates that investors are likely to be waiting for some time before they get all their money back as it appears that progress on selling the unlisted and highly illiquid assets has been very slow, with none sold so far and no date for when a sale is likely.

‘It’s likely that Park Hill, which is running the sale of these assets, has had offers but none that it deems acceptable. Link has also warned that the remaining 21% of the fund in more illiquid listed assets will also take a while to offload.

‘Investors can take some solace in the fact that some of the assets that have been sold to date have been reinvested back into FTSE 100 trackers, so they will have benefited from some of the post-election bounce the index has seen so far today, however this is likely to be scant consolation.’

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Issue Date: 13 Dec 2019