Investors trapped in the Woodford Equity Income Fund could receive up to £235mn in redress payments from the fund’s administrator, the Financial Conduct Authority (FCA) has announced.
The redress will cover a portion of the losses of the roughly 300,000 investors who were trapped in the fund when it was suspended almost four years ago. If the redress sum is paid out in full, investors will have recovered about 77 per cent of their losses, including the proceeds from asset sales that have already been distributed.
The FCA’s investigation found that the fund’s administrator Link Fund Solutions failed to properly manage its liquidity. Investors who left the fund before it was suspended “benefited disproportionately” from the sale of its most liquid assets, according to the regulator. Meanwhile, those who stayed in the fund were left with a larger and unfair share of illiquid assets, some of which remain unsold to this date.
The redress payment is conditional on the sale of Link Fund Solutions by its parent company Link Group to the Dublin-based Waystone Group, as well as on the investors’ approval.
Ryan Hughes, head of investment partnerships at AJ Bell, said the deal looks likely to go ahead. “Given the public announcement, it must be assumed that the FCA have a strong level of confidence that the sale of the business will go through, and it would be a surprise if Woodford investors didn’t approve the deal given how long this sorry saga has dragged on for,” he noted.
Therese Chambers, executive director of enforcement and market oversight at the FCA, said that the proposal “offers investors the best chance to obtain a better outcome than might be achieved by any other means”.
The Woodford fund shuttered in June 2019 before Link announced it would wind up the fund later that year. Third parties were appointed to wind down the funds listed and unlisted assets in late 2019, but some of the investments remain unsold to this day. This is despite the fund managers and Link collecting fees from trapped investors for years.
If the redress plan is approved, the FCA’s investigation into Link Fund Solutions will be settled however its investigations into other parties involved in the Woodford affair remain open.
Legal cases against Link and also broker Hargreaves Lansdown, which was critiscised for its promotion of the fund, remain ongoing.
