Link set to pay out £235m to investors burnt by Woodford fund collapse
The manager of Neil Woodford’s collapsed investment fund is set to pay £235m to investors after striking an agreement with the Financial Conduct Authority.
In an announcement this morning, the City watchdog said that Link Fund Solutions and its parent company Link Administration Holdings had proposed a scheme that will see the firm pay redress to those invested in the Woodford Equity Income Fund (WEIF) when it went under in 2019.
The deal marks a major step towards compensation for investors after years of legal wrangling over the collapse of the fund in 2019. The WEIF was frozen by Link after a rush by investors to withdraw their cash.
Formerly star-stockpicker Woodford splashed investors’ cash on unlisted equities and triggered a run on the fund after two years of poor performance.
The FCA had been conducting an investigation into the collapse and said today it found that failures by Link in managing the liquidity of the fund meant those who “didn’t redeem their investments before it was suspended, were unfairly disadvantaged.”
“The final redress figures will be based on investors voting to approve the scheme. If it is approved, we expect it to provide up to approximately £235m in compensation for those who lost money,” the FCA said.
“We think this proposal both maximises the available redress and is the fastest way for it to be paid.”
The payout of the redress will now hinge on Link’s successful sale of the Link Fund Solutions business to rival Waystone, which will provide a chunk of the cash required for the scheme.
Analysts at AJ Bell said today that the public announcement from the FCA implied a “strong level of confidence that the sale of the business will go through”.
“While it will take some time for this redress process to complete and for payments to be made, investors are one step closer to being able to finally put this whole sorry episode to bed,” said AJ Bell’s head head of investment partnerships, Ryan Hughes.
An initial investigation by the FCA had calculated the total losses to remaining investors in Woodford’s fund as being around £306m, which it said were “substantially greater than the remaining assets of LFS”.