On 15 October 2019, Link Fund Solutions Ltd (LFS), the Authorised Corporate Director (ACD) of the LF Woodford Equity Income Fund (WEIF) announced that it will not seek to re-open the WEIF and instead, it will look to wind-up the fund as soon as practicable. LFS considers the winding-up of the WEIF to be in the best interests of all investors and will enable the return of cash to investors at the earliest opportunity. LFS expects the winding-up to begin in mid-January, subject to regulatory approvals. LFS will now request formal approval from the Financial Conduct Authority (FCA) to wind-up the fund.

Why did the fund suspension happen?

On 3 June 2019, LFS decided to suspend dealings in the WEIF in order to protect all investors in the fund following an increased level of redemptions. Had the fund not suspended, as a “forced seller” of its assets to meet redemptions, the values received by the WEIF for such assets could have been adversely impacted and the fund might not have received full value from such sales.

The suspension was designed to give Woodford Investment Management Limited, the investment manager of the WEIF, time to reposition the fund’s portfolio into more easily sold investments. This would have allowed the WEIF, upon lifting of the suspension, to meet redemption requests. LFS sought to reposition the fund’s portfolio by early December 2019 to enable it to re-open and monitored progress to ensure that this date remained achievable. LFS considered it would not be possible to lift the suspension and re-open the WEIF until the sale of its less easily sold assets was completed. Failure to do so before the re-opening of the fund would risk a further suspension and unequal treatment of investors, particularly for those who chose to continue to remain invested in the WEIF.

Why is the WEIF being wound up?

Since the suspension on 3 June 2019, the FCA has been in regular contact with LFS while the firm pursued the resolution of this matter. LFS set various targets for making progress with the repositioning of the fund. Whilst progress has been made in relation to repositioning the WEIF and disposing of its less easily sold assets, this has not been sufficient to provide reasonable assurance that the repositioning would be fully achieved and the WEIF could be re-opened in December. Because sufficient progress was not made, LFS has decided it is in the best interests of all investors to seek to wind-up the WEIF rather than continue to reopen the fund.

The FCA welcomes the removal of uncertainty that LFS’s decision provides. The FCA recognise that investors have been concerned about the state of their investment since the beginning of June. Winding-up the fund will allow the return of money to investors through a number of distributions, likely to begin in January 2020. This means investors should receive some of their money back sooner than had the fund remained suspended for a longer period.

What does this mean if I’m an investor in the WEIF?

LFS has published an investor circular; it is important that all WEIF investors read this update.

A fund winding-up means it will close and money will be returned to you. Returning money takes place in instalments as the assets in the fund are sold. LFS expects to make these as soon as possible once the formal winding-up begins, which is expected to commence in mid-January, because three months’ notice needs to be given to investors under the rules implementing the applicable European Directive. During the period up to the commencement of the winding-up of the WEIF, the fund’s assets will continue to be repositioned in preparation for this event. In addition, some of the fund’s assets are more difficult to sell which means it may take longer to sell them for a reasonable price.

What are the arrangements for the management of the fund’s assets?

LFS remains the ACD of the WEIF. This means it will be responsible for the orderly winding-up of the fund. LFS has appointed BlackRock Advisors (UK) Limited to help sell the fund’s assets. During the period of suspension, LFS appointed PJT Partners (UK) Limited as a specialist broker to assist the firm in selling the WEIF’s less easily sold assets. PJT Partners (UK) Limited will continue in this role. Following LFS’s decision to wind-up the WEIF, Woodford Investment Management Ltd will no longer be the investment manager of the fund, with immediate effect and the fund will also be renamed as a result.

Who will return my money to me?

Who will return your money depends on how you invested in the fund. You should receive money from any intermediary through which you invested in the fund (e.g. a platform provider or an adviser), or LFS directly. For example, if you invested online via a platform (sometimes known as a ‘fund supermarket’) then you will receive your money back from the platform, once they receive your money back from LFS.

How much of my money will I get back?

The amount you will receive will depend on the fund’s value and the amount raised by selling the fund’s assets. The fund’s value fluctuates in line with the market values of its underlying assets. If assets are sold for lower prices, you will receive less from the winding-up process and this also may be less than you originally invested.

As previously communicated, the FCA have opened an investigation into the activities that led to the suspension of the WEIF. They cannot comment further on ongoing investigations.

Source: FCA