Northern Rock, Equitable Life, Icesave, New Star … and now Woodford Investment Management. Neil Woodford’s investment business is the latest on the list of companies that have either collapsed, nearly gone under or been shut down.
Woodford announced on Tuesday that he was closing his business after being fired from his flagship fund, Woodford Equity Income, which will now be wound up. Investors in this fund will get their money back in stages, but should brace themselves for heavy losses – and it could be a year or more before the final payments are made.
What’s happened?
In June, Woodford suspended all trading in the fund after being overwhelmed by customer withdrawals following a series of bad market bets. Woodford was fired and the administrators, Link Fund Solutions, said it was “in the best interests of all investors” for the fund to be wound up.
How many investors are there?
Several hundred thousand.
What now?
LFS says the plan is to return investors’ cash “at the earliest opportunity”. The winding up of the fund will start on 17 January, and the money will be returned in chunks. The first payment could be made by the end of January after some of the easier-to-sell assets have been flogged. The “unquoted and less liquid” assets will be sold off over time. Unfortunately, says LFS, it is not possible to predict when the sale process will be completed.
How much will people get back?
We don’t know yet. “Sadly, many people will be looking at significant losses,” reckons Adrian Lowcock at the investment firm Willis Owen.
Ryan Hughes at the investment platform AJ Bell says that while investors will not be charged direct fees while all this happens, they will still be incurring high costs for the winding up of the fund – particularly relating to offloading the tricky-to-sell assets. “These costs will be taken out of any proceeds from the sale,” he adds.
As of the middle of this week, Woodford Equity Income had returned a loss of about 26% over the past year.
Might I have money in the fund but not know it?
It’s possible. For example, six of Hargreaves Lansdown’s multi-manager funds are invested in it. They include the £2.7bn Multi-Manager Income & Growth fund. At the end of September, about 11% of this fund was invested in Woodford’s fund.
What about the Financial Services Compensation Scheme?
The FSCS can pay compensation if a financial firm is unable to pay back money it owes. Before it can pay redress, it must be satisfied that a firm does not have sufficient assets to meet claims. The FSCS says it is not expecting to be involved, but it is monitoring developments.
