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.
AJ Bell head of investment partnerships, Ryan Hughes, comments on the FCA’s announcement concerning redress for investors in the Woodford Equity Income Fund: “The FCA and Link Group have agreed a pay-out of around £235m to investors. However, this is dependent on the successful sale of the business to Waystone and the approval of investors entitled to redress. As a result, there are still further hurdles to overcome, although, 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. The scale of the financial redress is evident given that it effectively wipes out the UK Fund Solutions business. With a number of distributions having been made to investors over the past 3 years the redress payment should take the recovery level to around 77% of the value of the fund on suspension, with a very small balance left in the few remaining unquoted companies that have still to be sold.
“While approval of this redress scheme with Link would close the case and liabilities against them, the FCA points out that this remains a live investigation with other parties remaining under investigation. As a result, the Woodford drama will drag on past the four year mark but many investors will no doubt be glad that significant progress now looks to have been made. 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.”