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Woodford Equity Income Fund
Insolvency Insider
April 27, 2023
The FCA has announced a plan to deliver £235 million in redress to Woodford investors nearly four years after the firm collapsed.
The Woodford Equity Income Fund was the flagship fund of Neil Woodford, the UK's most famous fund manager. The Fund was suspended by Link Fund Solutions (LFS), its Authorised Corporate Director (ACD), in June 2019, after several of its investments tumbled in value, leading to a sharp increase in investor redemptions that Woodford struggled to meet. The Fund went from having £10.2 billion of assets under management at its peak to just £3.7 billion by the end of May 2019.
The FCA has been investigating the circumstances leading up to the suspension of Woodford ever since. The investigation concluded that LFS made critical mistakes and errors in managing Woodford's liquidity, with the result that the Fund failed to have a reasonable and appropriate liquidity profile from September 2018. This led to a situation where investors who continued to hold investments in the Fund at the time of its suspension were treated unfairly, because they were left with a disproportionate share of the remaining, more illiquid, assets.
The FCA originally calculated the losses to remaining investors as being up to approximately £306 million, which was substantially greater than the remaining assets of LFS. As a result, the FCA has been in discussions with LFS’s ultimate parent, Link Administration Holdings (Link Group), to reduce the shortfall as much as possible.
This has resulted in Link Group agreeing to make a "material contribution", subject to the completion of a sale of Link Group’s Fund Solutions business, including LFS's business, to Waystone Group, as well as the approval by investors and the Court of a scheme of arrangement to resolve LFS’s liabilities relating to Woodford.
The sale of Link Group’s Fund Solutions business will generate up to approximately £140 million in sale proceeds.
If the scheme of arrangement is not approved, Link Group has indicated it will not make the redress contribution, which would mean any redress would be dependent on the outcome of a contested case between the FCA and LFS, and any redress would be limited to the net assets of LFS, less litigation and any other costs.