The warning is part of a letter to investors released today (October 6), with the former licensed company director suggesting investors will need to redefine any expectations they may have.
“Investors are reminded that the assets remaining for sale are the least liquid assets in the fund and it is expected that some of these assets will not be sold until mid-2023,” chief executive Karl Midl wrote.
Link Group takeover deal collapses on FCA Woodford terms
This is the fifth capital distribution from the LF Equity Income fund and the first in almost two years, with around £20 million due to be returned to investors. The final amount will be confirmed in November.
The latest capital distribution was the result of the sale of a portfolio of 19 healthcare companies to Acacia Research Corporation for £220m and Ombu to Hambro Perks for £30m.
Within a year, the total value of Oxford Nanopore, which was included in the healthcare portfolio, had increased to such an extent that the single position exceeded the price paid for the entire portfolio.
Collapse of the NAV
When Link last wrote to investors on June 14, 2022, the value of the remaining assets stood at £118.5m, which has since fallen to just £79.9m.
Midl explained that this was due to the fall in value of Benevolent AI from €8 per share to €3.91 per share, wiping out 26.75% of the fund’s remaining value.
However, the remaining drop of £7.4m, representing 6.2% of the fund, remains unexplained.
Link to challenge £306m Woodford reparations bill
Rutherford, one of eight remaining assets, went into liquidation earlier this year, which could dampen further capital distributions. At the time, he saw £24m wiped off the fund’s net asset value and Link opted to revalue his stake to zero to reflect the current uncertainty about the possibility of any return.
Besides Rutherford and Benevolent AI, the fund also owns Atom Bank, Freevolt, Nexeon, Origin, RM2 and Mafic, a US basalt maker in which LFS has invested twice since the start of the liquidation.
Head of Investment Partnerships at AJ Bell, Ryan Hughes, said: “Investors will be delighted to hear of a new distribution from the former Woodford Equity Income fund, as Link continues to try to liquidate the fund. This The £20m payment represents around 25% of the fund’s remaining balance and will be the fifth distribution since the fund’s liquidation process began around three years ago.
“However, this of course leaves a further £60m of assets in a number of unlisted companies which have yet to be sold. With market volatility high and the economic outlook difficult at best, given that these companies are have not been sold in the past three years, these final positions are unlikely to be sold quickly unless Link is prepared to accept a discount to the current valuation.
“Winding up the fund was always likely to be a challenge and it certainly turned out to be the case. Investors will be happy to see this after such a long and painstaking process, although it looks like there are still a lot of twists and turns in this sad saga.