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Woodford investors suffer 20pc haircut as healthcare stocks sold off

Taha Lokhandwala
Neil Woodford

Investors trapped in Neil Woodford’s scandal-hit Equity Income fund are nursing a hefty loss after administrators sold its small and private healthcare stocks at a significant discount.

Days after the first anniversary of the fund's suspension, administrator Link said it had offloaded its health holdings to US investor Acacia Research Corporation for £224m.

The update came as law firm Nelsons announced it was considering action against the administrator for its part in the Woodford scandal, which trapped hundreds of thousands of savers' money in high-risk and hard-to-sell stocks following a string of catastrophic bets by the one-time star fund manager.

The sale to Acacia means the fund now has £224m of cash which it can distribute to investors as the winding-up process continues.

As of June 3 the portfolio was only worth £444m, including the £224m of cash, compared with £558m before the sale.

This shows the healthcare stocks were sold at a substantial discount and the remaining investments have also fallen in value. Investors’ remaining savings are 20pc lower as a result.

Link said it could not give a date for when the money will be returned to investors. It said the sale of the stocks to Acacia could take up to six months and will give a further update by 29 July.

The administrator was also tight-lipped on what will happen with the remaining £220m still invested in privately held firms. Investment companies BlackRock and Park Hill have been advising Link on the sale process.

Link said: “This agreement with Acacia will enable us to distribute money  to investors in due course.”

Some £2.3bn has been returned to investors since the decision to close the fund and sack Mr Woodford in October last year.

June 3 marked was the first anniversary since Mr Woodford was forced to shutter his fund after running out of ready cash to pay back investors following a stampede for the exit. The manager had invested too much in difficult-to-sell small and private companies, leaving funds inaccessible.

At the time the fund was worth £3.5bn. Even if investors get back the remaining £444m in full - which is highliy unlikely - losses since it shut will be staggeringly high.

Lawyers have been rushing to assemble class action cases over the disaster, with most focused on broker Hargreaves Lansdown after it repeatedly plugged Woodford funds in its best buy lists.

Today, Nelsons said it would also target Link over its failure to intervene earlier than June 2019. Link was tasked with making sure that the fund was being run safely and in line with the rules, and - apart from Mr Woodford - was the only player involved able to see the rise in risky bets, lawyers have claimed.

Cathryn Selby of Nelsons said investor losses could have been avoided had Link done its job properly and stepped in sooner.

She added: "Link had a fiduciary role and a regulatory obligation to ensure that the fund was run in the best interests of investors, ensuring they were protected and treated fairly."

The case against Link will focus on claims it allowed Mr Woodford to dodge rules which bar managers from investing more than 10pc of a fund in unlisted stocks.

As a bypass, the manager listed the fund's shares in private companies on the Guernsey stock exchange. This meant that for regulatory purposes they were classed as being listed shares but in reality were no more easy to trade than before.

Link declined to comment.