LF Woodford Equity Income Fund to close and distribute proceeds

Cash from assets sales is expected be paid to investors’ accounts in instalments from the end of January 2020.

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  1. Rob Morgan

Link Fund Solutions Limited, Authorised Corporate Director ("ACD") of the LF Woodford Equity Income Fund, has today announced the Fund is to be wound up as soon as practicable. This is to be achieved through an orderly realisation of the Fund’s assets, with cash returned to investors at the earliest opportunity. In short, everything the Fund holds will be sold with proceeds paid to investors in stages. 

Winding up

Dealing was suspended in the Fund from 3 June 2019 following a period of significant redemptions from investors. It was intended that a period of suspension would allow manager, Neil Woodford, time to reposition the part of the Fund's portfolio invested in unquoted and less easily-traded stocks into more liquid investments – thus enabling the Fund to meet redemption requests.

The aim was to re-open the Fund by early December 2019, but as I mentioned in a previous article, the process of selling unlisted investments is complex and can take a long time. While progress has been made in repositioning the portfolio, Link now state, “This has unfortunately not been sufficient to allow reasonable certainty as to when the repositioning would be fully achieved and the Fund could be re-opened in the best interests of all investors.”

Link has concluded it is in the best interests of all investors for the Fund to be wound up. This will commence on the 17th January 2020, following the required three month notice period.

Change of manager

Link has also made new arrangements for the management of the Fund. With immediate effect, Woodford Investment Management will cease to act as investment manager. Instead, the Fund is now divided into two parts; one comprised primarily of more easily-tradable listed assets labelled ‘Portfolio A’, and one made up of unlisted and hard-to-trade assets labelled Portfolio B.

BlackRock has been appointed to wind up the former, while specialist broker PJT Partners (Park Hill) will focus on the latter. BlackRock will seek to reinvest in money market funds and FTSE 100 index instruments, a process that should enable a significant part of investors’ cash to be returned as soon as possible once the Fund begins the winding up process. Park Hill has already been involved in helping sell the Fund’s ‘illiquid’ holdings during the suspension period and this process will continue.

Ahead of the winding-up, we anticipate the Fund’s assets will continue to be repositioned in terms of the disposal of less liquid assets. However, some of the Fund’s assets are more difficult to sell which means it may take longer to sell them for a reasonable price. The aim is to avoid a "fire sale" of any asset, i.e. a short term sale that results in a lower value being realised.

Change of Fund name

Once regulatory permission has been received, the name of the Fund will change from “LF Woodford Equity Income Fund” to “LF Equity Income Fund”.

What next?

This news removes significant uncertainty,and means investors should receive some of their money back sooner than if the fund had remained suspended for a longer period.

If you hold the Fund, please note you are not required to take any action. We anticipate cash from proceeds of assets sales will be paid to investors’ accounts in instalments from 17th January 2020. It is likely that the first capital distribution will be paid by the end of January 2020. However, the size and frequency of these payments are uncertain as they will depend on the fund’s value and the amounts raised by selling assets.

We expect further announcements will be made by Link in due course, and we will update investors as soon as we know more. In the meantime, the Fund will continue to be valued in the usual way and the unit price shown in online valuations.

Given the intended closure, and that it may take an extended period for all assets to be sold and cash returned to investors, in this particular instance our platform fee will be waived on holdings in the Fund effective from today.

Past performance is not a reliable guide to future returns. This website is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus. If you are unsure of the suitability of your investment please seek professional advice.

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