Woodford fund manager set to return £20m to burnt investors

The manager of Neil Woodford’s collapsed investment fund said today it plans to give £20m back to investors after it was warned by the financial watchdog it would be hit with a hefty bill over its role in the scandal last month.

In a letter to investors, Link Fund Solutions (LFS) said it would begin paying back the cash to investors next month by way of a capital distribution.

“We will write to you again in early November to confirm the total amount to be distributed to investors,” the firm said in a letter.

“Based on an estimated fifth capital distribution of £20m, a total of £2.56bn will have been distributed to investors since the commencement of the winding up of the Fund.” 

Link was warned by the Financial COnduct Authority last month that it would face a bill of up to £306m over its failure to properly manage the liquidity of the Woodford Equity Income Trust before it was frozen.

Retail investors were left millions of pounds out of pocket after disgraced fund manager Woodford’s eponymous fund was shuttered after pumping cash into speculative bets on unlisted firms.

Burnt investors have been campaigning against LFS in a bit to recoup some of their losses. Legal firm Harcus Parker filed a suit earlier this year on behalf of the investors against LFS in a bid to reclaim £18m from the firm.

The illiquid nature of the fund’s remaining holdings is likely to scupper quicker payouts to investor in the short term, however. LFS said today that the fund is not likely to be wound up before mid-2023 .

LFS said today that the fund’s value had more than halved since the last update in June as its largely tech-based holdings have been hammered by a downturn year, with net asset value falling from eight euros per share to 3.91 per share.

“This is equivalent to a fall in the total value of the asset held by the Fund of around £31.2 million (or 26.75 per cent),” LFS MD Karl Midl wrote in the letter.

“As we explained in our letter of 15 June 2022, because the Fund now holds relatively few assets, and because some of the shareholdings (such as Benevolent AI) have a relatively large weighting compared to others, a change to the value of such assets will lead to a disproportionately large percentage increase or decrease in the Fund’s NAV.”