Woodford’s empire collapses – what happens to his investors now?

With Neil Woodford getting his marching orders and his funds being shut down, John Stepek explains what it means for his former empire, and for those with money locked in.


It's the end of the line for Neil Woodford.

After yesterday's move by Link Asset Services to fire him as manager of his flagship Woodford Equity Income Fund (WEIF), the writing was on the wall.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Woodford succumbed to the inevitable last night and shut down his fund management group, Woodford Investment Management.

But what does this mean for his funds?

Advertisement - Article continues below

Woodford was fired from WEIF by Link Asset Services, the authorised corporate director of the fund. The fund will be renamed the LF Equity Income Fund and wound down in other words, the portfolio will be sold and the leftover cash returned to investors.

In effect, the portfolio will be split into two Link has appointed BlackRock Advisors to sell the more liquid stocks, while specialist broker Park Hill will keep trying to find buyers for the unquoted firms.

The money will be returned in stages. Link hopes to make the first payment at the end of January. What might investors get back? It's impossible to say. But the fund's value has already fallen by about 20% since it was suspended in June. Throw in the fact that there's an element of forced selling involved, and investors should prepare for a very significant loss (more on this in yesterday's Money Morning).

Meanwhile, with Woodford resigning, it means that his other open-ended fund, the Woodford Income Focus fund, is to be wound down too. Withdrawals from this fund were suspended today. Link is aiming to update investors on the fate of this fund (which has a more liquid portfolio than WEIF) within the fortnight. But anyone who had money in it is stuck for now.

As for the investment trust, Patient Capital Trust Woodford will work out his three-month notice period, and at the time of writing, the board insists it is close to appointing new managers.

The trust now trades on a huge discount to net asset value (NAV the value of the underlying portfolio) of around 50%. That might look tempting to the foolhardy. Yet we have no way of knowing how accurate that is (bear in mind that it shares many holdings with the WEIF which is now trying to sell off its portfolio).

Advertisement - Article continues below

So if and until a new broom comes aboard and gives a realistic view of the NAV, it's impossible to make the buy' case. Continue to stay away from PCT for now.

And if you want to know more about "how avoid a Woodford" in future, then make sure you book your ticket for the MoneyWeek Wealth Summit in London on 22 November. Find out more here.



Neil Woodford

Woodford investor? Your first payment is coming soon

Private investors left stranded by the collapse of the Woodford Equity Income fund will soon be getting at least some of their money back. But they wi…
28 Jan 2020

Neil Woodford rides again

Neil Woodford’s speedy descent made Icarus look like a slouch. Many thought he would now be spending more time with his horses. He’s actually plotting…
1 Jan 2020
Neil Woodford

Neil Woodford: no silver lining for his investors

Neil Woodford made every mistake it is possible to make as a money manager. And his investors have been stiffed. But however wrong it all went, Woodfo…
24 Oct 2019
Neil Woodford

Neil Woodford, fund managers, and the systemic risk to the financial system

The consequences from the Neil Woodford debacle aren't limited to his fund's investors. He and his ilk could pose a systemic risk to the financial sys…
27 Jun 2019

Most Popular

House prices

The biggest risk facing the UK housing market right now

For house prices to stagnate or even fall would be healthy for the property market, says John Stepek. But there is a distinct danger that isn't going …
17 Feb 2020

The euro’s slide against the US dollar looks set to continue

The euro has been in a bear market against the US dollar for two years now. And on a broader scale since 2008. A decline like that is telling us somet…
19 Feb 2020
Share tips

Three overlooked stocks to buy now

Each week, a professional investor tells us where he’d put his money. This week: Joe Bauernfreund, portfolio manager at the AVI Global Trust, highligh…
17 Feb 2020

Why investors shouldn’t overlook Europe

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, tackles investor questions around Europe’s economic outlook and the conseq…
6 Nov 2019