Breaking: Neil Woodford fired from flagship Equity Income Fund, fund to be wound down
By Tom Winnifrith, the Nemesis of Neil Woodford | Tuesday 15 October 2019
Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Link had agreed to give Woodford until December to sell all of his unquoted and illiquid assets and reposition the fund in cash and blue chips so that investors could again buy and, more importantly, sell units. We have repeatedly warned that Woodford would struggle to sell his illiquid and unlisted investments at anything other than pennies in the pound
However, after consulting with the FCA, Link states in a letter to investors, below, “Whilst progress has been made in relation to repositioning the Fund’s portfolio, 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.”
Fund management giant Blackrock has been asked to sell all the liquid investments and the proceeds from that exercise will be returned to unit holders as soon as the end of January. Meanwhile specialists at PJT partners will try to sell the unlisted and illiquid investments but this will take some time so the proceeds from that may not be returned to unit holders for months or even longer.
This is a sensible solution and the only practicable one. I cannot see why the FCA and Link dithered for so long in making it, allowing Neil more time to mismanage the portfolio and earn £65,000 a day in fees for doing so.
So what next? Woodford Investment Management is left being paid to mis-manage just one fund, the Income Focus Fund. Its NAV is now just over £250 million and will be swamped with redemptions. How soon before it is gated? Meanwhile Woodford Investment Management will, as of today, see its fee income (from IFF) slump to less than £2 million per annum. It cannot hope to cover its costs from that and no-one else will trust Neil to manage money so it is only a matter of time before IFF is also put into wind-down or merged with another fund and before Woodford Investment Management goes bust.
The FCA, meanwhile, will now be under real pressure to investigate how the man dubbed Britain’s Buffett by fawning journalists, notably at the Mail on Sunday, has cost investors billions. And to explain why four years of warnings from this website went unheeded. If only to divert attention from its own failings, the FCA must surely now start a full enquiry into Mr Woodford whose City career is over but whose antics do border on the criminal.