Investors trapped in Neil Woodford’s failed equity fund are set to get up to £235 million ($292 million) in compensation after a regulatory probe found its administrator mismanaged liquidity in the fund.
(Bloomberg) — Investors trapped in Neil Woodford’s failed equity fund are set to get up to £235 million ($292 million) in compensation after a regulatory probe found its administrator mismanaged liquidity in the fund.
The redress will cover some of the losses to over 300,000 investors stuck in the disgraced stock picker’s LF Woodford Equity Income Fund, the Financial Conduct Authority said in a statement Wednesday. Link Fund Solutions, which was the fund administrator, will pay the sum with help from its parent company Link Group.
The City watchdog said the fund administrator “made critical mistakes and errors” in managing the fund’s liquidity and that as a result “the fund failed to have a reasonable and appropriate liquidity profile from September 2018.”
Woodford’s fund empire collapsed in June 2019 after a series of large withdrawals led to its suspension, trapping thousands of investors and around £3.7 billion in assets. Woodford was ousted as manager of the fund in October of that year, and announced he would shutter his investment firm, a stunning fall that counts as one of the most dramatic in London’s financial history.
Subsequent asset sales have seen investors recoup some of their money but they are still facing losses.
“By 1 November 2018, LFS’s failure to have properly measured the liquidity of the WEIF meant that investors leaving the fund from that point onwards benefited disproportionately from access to the most liquid assets in the fund which were sold,” the FCA said in the statement.
Read more: Link Jumps on Sale of Fund Solutions to Waystone, FCA Settlement
The FCA said it considers those investors who continued to hold 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 agreement is subject to completion of a sale of Link Group’s fund solution business to the Waystone Group and the scheme will also require court approval. If the sale is completed and the scheme becomes effective, LFS will agree to settlement of the FCA’s investigation. The findings of the investigation including an analysis of how the findings amount to breaches will be published at that stage.
–With assistance from Tom Metcalf.
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