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Woodford investors face £10m-plus wind-up costs

Winding up LF Equity Income is likely to cost more than £10m
January 30, 2020

Investors trapped in LF Equity Income Fund (GB00BLRZQ844), which was run by Neil Woodford until late last year, could face costs of more than £10m for its wind-up.

 Link Fund Solutions, the fund's authorised corporate director, said in an update on 29 January that the fund had already accrued costs of just under £5m since Mr Woodford was removed as its manager in mid-October. Link has set aside around £5.3m for other costs incurred during the wind-up including transaction fees and brokerage costs, and £22.5m for “estimated further funding and commitments in relation to investments of the fund.” These relates to known and future funding commitments of the fund’s holdings.

Although the first distribution of capital to investors as the fund winds up is worth about 75 per cent of its fund's assets as at 24 January, Link warned that the timing of future payments is difficult to predict because of the illiquid nature of the assets yet to be sold.

“It is intended that further capital distributions will be made as and when suitable amounts of cash have been raised from the sale of the assets of the fund,” stated Link. “At this stage we are unable to advise you of the exact timing and amount of these subsequent capital distributions as this is dependent upon assets being realised within the fund. Investors should be aware that the assets that remain to be sold are less liquid and disposing of them may take longer than was the case for the sales to date.”

Ryan Hughes, head of active portfolios at investment platform AJ Bell, said: “This update also gives an indication that Park Hill [the specialist broker which is selling the illiquid assets] has made little progress with selling the illiquid assets and, while unsurprising, this is disappointing for investors. With no timescale being given on how long this is likely to take, investors should brace themselves for a long wait for the remainder of their money. Link also said that the fund's price will now only be updated on a weekly rather than daily basis, which reflects the reality that little will change in the portfolio and investors should watch the price carefully to see how it is impacted by any revaluation or sale of the remaining assets."