Investors in Woodford funds warned illiquid holdings to throttle future payouts

Investors in Neil Woodford’s frozen fund will receive a further £20m but face dwindling prospects for further recovery as the downturn in markets hurts the value of the remaining companies backed by the former star stockpicker.

Link Fund Solutions, the manager overseeing the shutdown of the Woodford fund, said in a letter to investors on Thursday that it was prepared to pay out another tranche after selling the small holdings of shares still held in the fund.

The fund’s value shrank by a third between June and September, Link said, as he downgraded the price of his remaining portfolio of eight mostly early-stage companies, limiting the amount investors could make in a sale can expect.

Start-ups and companies promising rapid growth have had their valuations cut this year as rising interest rates and a slowing global economy prompt investors to become more defensive.

“Investors are reminded that the assets remaining for sale are the fund’s less liquid assets and some of these assets are not expected to be sold until mid-2023,” wrote Link Managing Director Karl Midl.

Link’s update comes as legal allegations over the demise of the Woodford fund gather momentum. Link faces a deadline this week to respond to a draft alert from the Financial Conduct Authority about his “failures to manage liquidity” at the Woodford fund. The regulator is demanding more than £350m in fines and compensation.

Link has said it disagrees with the regulator’s view and can challenge the draft alert, a process that could drag on for months.

The company responsible for overseeing the Woodford fund froze the £3.7billion vehicle in June 2019 after the UK stockpicker struggled to meet investors’ demands to withdraw their money, some of which was invested in Participations in hard-to-sell private investments were tied to firms.

Link has since returned £2.54bn from asset sales to investors but has been unable to sell some of those smaller companies.

Much of the recent writedown comes from BenevolentAI, an AI drug discovery company listed in Amsterdam this year, whose shares have fallen from €8 to €3.91 Advances in new treatments Disappointed investors The fall in share price reduced the value of the Woodford fund’s stake in the group by £31.2m.

The fund took a £24million hit in June when another holding, cancer treatment company Rutherford Health, was liquidated. Link reduced the value of his stake 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 this month to buy Link’s parent company after the FCA tried to force the Canadian company to halt payouts over the Woodford saga. Link faces two lawsuits on behalf of investors which, if successful, could result in hundreds of millions of pounds in damages. Link has disputed the legal claims.

Investors in the fund are also awaiting the filing of a lawsuit against Hargreaves Lansdown, the fund supermarket, for its sponsorship of Woodford. Hargreaves Lansdown is dismissing the claims, which are expected to be filed in court in the coming weeks. Investors in Woodford funds warned illiquid holdings to throttle future payouts

Adam Bradshaw

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