Investors in Neil Woodford’s frozen fund will receive another £20mn, but face dwindling prospects for recovering more as the downturn in markets cuts the value of the remaining companies backed by the former star stockpicker.
Link Fund Solutions, the administrator overseeing the closure of Woodford’s fund, said in a letter to investors on Thursday that it was ready to pay out another tranche of cash following the sale of the small clutch of equities still held in the fund.
The value of the fund shrank a third between June and September, Link said, as it marked down the price of its remaining portfolio of eight mostly early-stage companies, curbing the amount investors can expect to recover when they are sold.
The valuation of start-ups and those companies promising rapid growth have been slashed this year as rising interest rates and a slowing global economy prompt investors to become more defensive.
“Investors are reminded that the assets that remain to be sold are the less liquid assets of the fund and it is expected that some of these assets may not be sold before mid-2023,” wrote Link managing director Karl Midl.
The update from Link comes as the legal recriminations over the demise of the Woodford fund gather pace. Link faces a deadline this week to respond to a draft warning notice from the Financial Conduct Authority over its “failings in managing the liquidity” of the Woodford fund. The regulator is seeking more than £350mn in penalties and redress payments.
Link has said it disagrees with the regulator’s view, and it can challenge the draft warning, a process that could drag on for months.
The company, which was responsible for supervising the Woodford fund, froze the £3.7bn vehicle in June 2019 after the UK stockpicker struggled to meet investors’ demands to withdraw their cash, which was partly tied up in stakes in hard-to-sell private companies.
Link has since returned £2.54bn to investors from the sale of assets, but has not been able to sell some of those smaller companies.
A large chunk of the recent writedowns come from BenevolentAI, an AI drug discovery company that listed in Amsterdam this year, whose shares have plunged from €8 to €3.91 as its progress on new treatments disappointed investors The share price fall cut the value of the Woodford fund’s stake in the group by £31.2mn.
The fund suffered a £24mn blow in June when another holding, cancer treatment company Rutherford Health, entered liquidation. Link cut the value of its holding to zero.
The fund’s other holdings include UK challenger lender Atom Bank and Freevolt, a company developing biometric cards for payments and cryptocurrency wallets.
Toronto-based software group Dye & Durham pulled out of a deal to buy Link’s parent company this month after the FCA tried to require the Canadian company to backstop payouts over the Woodford saga. Link faces two lawsuits on behalf of investors, which could run into hundreds of millions of pounds in damages if successful. Link has denied the legal claims.
Investors in the fund are also waiting for the filing of a lawsuit against Hargreaves Lansdown, the fund supermarket, over its promotion of Woodford. Hargreaves Lansdown rejects the claims, which are expected to be filed in court in the coming weeks.