Woodford investors face £10m bill for closure of fund

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
A screengrab taken from a YouTube video issued by Woodford Investment Management of Neil Woodford. Photo: PA

Investors who backed the flagship fund of stock picker Neil Woodford face a £10m ($13m) bill for its closure.

Fund administrators have run up bills of £5m liquidating the fund since deciding to close it last October, investors were told Wednesday night. Administrators estimate it will cost a further £5.3m to fully close down the fund.

The cash will go to asset manager BlackRock and financial adviser Park Hill, who have both been helping to sell-off Woodford’s investments.

Administrators also warned that a further £22.5m will go to companies Woodford backed. The money manager had signed contracts promising future investment, meaning the cash can’t be reclaimed.

The news came as investors were due to receive the first repayments from the fund, which has been locked since last June. Link Fund Solutions said £2.1bn will be handed back to investors, most of the fund’s current value of £2.8bn.

READ MORE: Woodford investors finally get some money from frozen fund

The distributions leave investors facing steep losses. Woodford’s Equity Income Fund was worth £3.7bn when it was gated last June but its investments have declined sharply in value since then.

Administrators may also struggle to realise the full value of the fund’s remaining £700m-worth of investments. The leftovers are illiquid investments in unlisted businesses, making them difficult to sell.

“This update gives an indication that Park Hill have made little progress on the selling down of the illiquid assets and, while unsurprising, this will be disappointing for investors,” said Ryan Hughes, head of active portfolios at stockbroker AJ Bell.

“With no timescale being given on how long this element is likely to take, investors should brace themselves for a long wait for the remainder of their money.”

The costs and delays are particularly galling for investors given the rich rewards enjoyed by Neil Woodford. Woodford and his partner Craig Newman paid themselves £13.8m in dividends in the year before the closure of the Equity Income Fund. The pair have taken over £100m in dividends since Woodford Investment Management was set up in 2014.

READ MORE: Money manager Woodford and partner paid £13.8m before collapse

Neil Woodford developed a reputation as one of Britain’s shrewdest stock pickers during a quarter century career at Invesco but this image lies in tatters after the collapse of his business.

Woodford Investment Management collapsed last October after a four month crisis sparked by the suspension of the Equity Income Fund. Woodford was forced to halt withdrawals due to troubles linked to illiquid investments.

Fund administrators took the decision to wind up the Equity Income Fund rather than find a new manager. Around 300,000 investors have money in the fund.

READ MORE: Fallen stockpicker Neil Woodford closes business and quits funds