Investors in fallen stock-picker Neil Woodford’s failed Equity Income Fund have been offered a compensation package worth up to £235 million almost four years after its collapse.
The proposed redress for more than 300,000 investors in the former Citystar’s LF Woodford Equity Income Fund was revealed late last night by City watchdog the Financial Conduct Authority (FCA). It will be paid by fund administrator Link Fund Solutions, with support from its Australian parent Link Group.
However, the deal is conditional on the completion of a sale of Link Group’s fund solution business to Waystone Group and will also require court approval.
The FCA said the fund administrator “made critical mistakes and errors” and as a result “the fund failed to have a reasonable and appropriate liquidity profile from September 2018.”
The failure of the Woodford fund, suspended amid a political and public furore in 2019, trapped 300,000 investors and triggered the FCA investigation and three London investor lawsuits. Woodford was criticised for holding a large number of illiquid assets.
The FCA said investors who still held investments in the fund when it was suspended “were treated unfairly because this left them with a disproportionate share of the remaining assets which were more illiquid”.
The proposed compensation is less than the estimated total losses of £298 million but would represent a recovery of around 77p in the pound.
Ryan Hughes, head of investment partnerships at broker AJ Bell, said: “Some 1,417 days have passed since the suspension of the Woodford Equity Income fund and today’s announcement from the FCA regarding financial redress due to the failings of the fund administrator, Link Fund Solutions, will come as significant relief for the thousands of investors who have been very patiently waiting for some form of compensation.
“As detailed in September 2022, the FCA found serious failings in the oversight and operation of the fund by Link and the investigation has concluded that this resulted in serious detriment for those investors who remained in the fund from September 2018.
Essentially, poor liquidity management meant investors in the fund were left with disproportionately high exposure to illiquid assets which ultimately brought down the fund as it could no longer repay investors who wanted to sell their holdings.
The scale of this illiquidity can still be seen today with some assets remaining unsold nearly four years later.”
In a separate announcement the FCA has begun an investigation into beleaguered tech firm WANdisco.
It follows an internal probe into suspected fraud at the company which found more than $115 million in missing bookings. WANdisco said: “The board is co-operating with the FCA in this, in addition to continuing to support the completion of the independent investigation already being undertaken.”
