Woodford Equity Income investors accuse fund administrators of throwing ‘good money after bad’ after cash is diverted into struggling US firm
The Woodford Equity Income Fund is being wound up following Neil Woodford’s fall from grace
Woodford investors have had ‘salt rubbed into their wounds’ after finding out that a chunk of the cash they were hoping to get back has been poured into another company.
Savers who had money in the Woodford Equity Income Fund, which is being wound up after Neil Woodford’s fall from grace, were still waiting to get around £200million back.
This was tied up in hard-to-sell assets which Link, the fund’s supervisor, has struggled to flog. But in a letter to investors yesterday – most of which Link spent complaining about the way in which it had been represented in the media – it emerged that Link had taken some of customers’ money and invested it in a company called Mafic.
The revelation was slipped out in just one paragraph of the letter from Link and investors have accused the company of throwing ‘good money after bad’.
Mafic is an unlisted, US-headquartered company which Woodford invested in several years ago. It produces basalt fibre, a material which can be used as an alternative to fibreglass and in fireproof materials.
But in February, the company called on its investors for more money. Former Woodford customers may have expected Link to steer clear of this funding round, since it was supposed to be selling investments and returning their money – not making new commitments. But Link handed over an undisclosed sum to Mafic.
In the letter yesterday, Link’s managing director Karl Midl said: ‘It is sometimes necessary to provide further investment.
‘After carefully considering all relevant information, we considered this action to be in investors’ best interests; specifically this short-term investment protected the value of the asset and maximised likely future proceeds of sale.’
In other words, without the further investment, Mafic was in danger of tumbling in value or even struggling to survive.
It is another blow for Woodford Equity Income investors, just a day after Oxford Nanopore – another former Woodford company, which Link sold to US fund Acacia Research last year in a cut-price deal – announced plans for a blockbuster float on the stock market.
Adrian Lowcock, head of personal investing at Willis Owen, said: ‘This is rubbing more salt in the wounds for investors.
Providing further investment is an investment management decision, and Link is not a manager.
‘Do they have the right expertise? Are they just throwing good money after bad?’ The Mafic investment also suggests that the winding-up of the Equity Income fund will take some time yet,Lowcock added.