WHAT THE WOODFORD WIND-UP MEANS FOR YOU AND YOUR CASH

Stephanie Baxter explains how the shock move will affect investors

In a final blow to Neil Woodford, his troubled flagship fund, which was suspended in June, is to be closed down. The shock decision was announced on Tuesday by Link, the Equity Income fund’s administrator.

Many investors are now worried that they might lose chunks of their life savings or be unable to afford to retire. QWhy is the Equity Income fund being wound up? A In a letter to investors, Link Fund Solutions said it had decided that winding up the fund was in the bes best interests of all savers. The portfolio had been suspended since June 3, when it was overcome by liquidity problems after a flood of investors pulled out o their cash. The suspension was supposed to give Woodford Woodfor time to reposition the portfolio into more liquid investments. This would have allowed it, after the lifting of the suspension, to meet requests from investors to exit. It had been agreed that the suspension should be lifted only when the sale o of its unlisted and less liquid listed assets was complete. complete Link’s letter said that while there had been progress to reposition the portfolio, it had “not “no been sufficient to allow reasonable certainty” as to when the fund could be reopened.

QWhen will Equity Income be closed?

ALinkA Link said the fund would be closed “as soon as practicable” after Jan 17 next year. It is not possible to start the process any earlier becaus because investors have to be given three months’ notice unde under the regulations. Mr Woodford, the former star manager who founded his firm in 2014, is no longer the investment manager and his name is being taken off the fund. The assets will be handed to BlackRock, the fund management firm, and Park Hill, a specialist adviser, to sell off and it will be renamed the “LF Equity Income fund”. LF stands for Link Financial.

The fund will be split in two: “Portfolio A” will contain listed assets and be managed by BlackRock while Park Hill will handle “Portfolio B”, the unlisted holdings that got Mr Woodford into trouble in the first place.

QWill I get my money back?

A Link said cash would be returned to investors at the “earliest opportunity” and that the move was designed to protect them. Savers do not have to take any action now.

Money will be returned through interim payments following an “orderly” sale of assets. The aim is to avoid a “fire sale” and maximise returns for investors.

After the deduction of any money that the fund owes and the costs incurred in the winding up, the payment of each individual’s share of the proceeds of the sale of assets will begin as soon as possible. It is uncertain when this will happen, but investors have been promised regular updates.

The amount that investors actually get back will depend on the value of the fund’s holdings at the time they are sold.

It is impossible to predict what this value could be, as it will depend largely on the state of the financial markets at that time, although savers could well get less from the winding-up process than they invested in the first place.

QWill

I have to keep paying fees? A The fund has been making around £65,000 a day in fees, which has caused outrage among investors.

However, savers will continue to pay the fund management charge, which is 0.75pc a year via most fund shops, until the winding-up process begins in January.

This money has always gone first to Link, which then pays the other parties involved.

Instead of passing the bulk of the money to Mr Woodford’s firm it will now pay BlackRock’s fees; it will also continue to pay those of the fund’s depositary, administrator, custodian and auditor.

Dealing and legal costs associated with selling the assets in Portfolio B, including Park Hill’s costs, will continue to be borne by the fund.

Such costs are normally in addition to the basic fund management fee.

Dealing costs will be greater during this period because of the requirement to sell all the assets.

Costs will be particularly high for selling the illiquid assets, which are more difficult to trade.

These costs will eat into the money investors get back.

Link said it would not take its own fee for acting as the fund’s “authorised corporate director” from the point of suspension.

If this leads to a surplus after the payment of all other fees, Link will return it to the fund.

QWho can I contact for help?

A Investors can call Link Fund Solutions on 0333 300 0381 or email equityincome@ linkgroup.co.uk. A financial adviser should also be able to help.