LF Equity Income Payments

Payments of the first capital distribution from the LF Equity Income Fund (formerly Woodford Equity Income) have now been made to investors. These have been stock sales from the liquid part of the portfolio, representing just over 70% by value. The residual assets of the LF Equity Income fund are illiquid unquoted stocks which will take longer to sell. However investor can expect one or more further payments in due course.

The distributions amounts were as follows:

Share Class ISIN Code Pence Per Share
LF Equity Income C Acc GB00BLRZQ73758.6631p
LF Equity Income C Inc GB00BLRZQ62048.2426p
LF Equity Income Z Acc GB00BZ01L372 58.9936p
LF Equity Income Z Inc GB00BLRZQB71 48.4932p

Most investors will have held the C share classes. The ISIN numbers are fund codes – each share class having its own unique reference. You can check your cash payment is correct by multiplying your shareholding by the appropriate pence per share figure in the table above.

The cash paid will be sitting in your ISA or other account awaiting investment or withdrawal.

Following the distribution, investors will continue to hold the same number of shares in the fund, but the value of them will be correspondingly lower. The bottom line of course when the fund is finally wound up investors will lose money. The amount will depend on how much additional money will be paid out from the residual holdings, any disposals prior to the closure of the fund and the price you paid to buy into the Woodford Equity Income in the first place.

Naturally I am sorry my clients have lost money from this investment, one I never dreamed would run into problems. Fortunately the amounts my clients invested at outset were relatively small in most cases. I do not recommend large sums are invested into single funds due to fund manager risk, the risk that they make big asset allocation and stock selection mistakes and it all goes pear shaped. Fortunately though it is very rare and it highlights the importance of having a diversified portfolio where the winners outnumber the losers. Advocates of index tracking would argue this is evidence that passive investment is better than stock picking strategies but that is another story.

Finally it is worth highlighting the difference between a crystallised and an uncrystallised investment loss. The Woodford Equity Income fund is a rare example of a forced crystallised loss. With the closure of the fund, investors had no choice but to accept they would lose money. However aside from Woodford in the vast majority of cases investors will experience uncrystallised or paper losses where the value of their funds are less than the amounts invested. A paper loss is just a snap shot at a specific point in time. Six months or a year later fund values may have risen and may now be in the black. In most cases investors need not be forced sellers and can therefore avoid real losses.  

The content of this blog is based on my own understanding of the winding up of the Woodford Equity Income fund. It is intended as general investment information only.  Nothing in this article should be construed as personal investment advice. You should seek individual advice based on your own financial circumstances before making investment decisions.