The Woodford Fund collapse
Kieran Smith comments on the WEIF collapse
The Woodford Equity income Fund (WEIF) was the flagship fund of the larger Woodford Fund portfolio, managed by former investment guru, Neil Woodford. While the WEIF was run by Woodford and his team, it was managed and supervised by a company called Link Fund Solutions.
Link were ultimately responsible for protecting investors and ensuring that Woodford and his fund managers invested savings in accordance with the fund’s rules.
Following a series of significant losses, the fund was suspended in June 2019 and eventually wound up in October 2019.
The FCA announced that it would be investigating the fund’s collapse.
You would be forgiven for thinking that 300,000 investors losing an estimated £1bn of their hard earned savings would be enough to finally prompt the Financial Conduct Authority (FCA) into action. Surely this would be the scandal which would finally spark much needed change to the levels of transparency and accountability within the finance industry? Apparently not.
For two years investors have waited for answers. For two years they have delayed retirement in the hope of recouping some of their savings. Unfortunately, those answers, and any hope of recompense, remain some way off.
Following increasing pressure from MPs, the Chief Executive of the FCA issued what was intended as an update in May this year advising that any report would not be issued before the end of the year. No fixed timescale has been provided.
Those familiar with the finance industry – an industry which stumbles from one scandal to the next - are all too aware that the City watchdog has a reputation for dragging their heels when it comes to investigating high profile, high value cases. It seems the Woodford fund collapse is no different.
Neil Woodford had a growing reputation, which is why established investment platforms, most notably Hargreaves Lansdowne, heavily promoted the WEIF to their users. So what went wrong?
The fund’s rules and guidelines included a 10 per cent limit on the number of unlisted securities which could be held at any one time. Unlisted securities are essentially stocks which are difficult to sell. The full details are not yet known, but it is possible those parameters may have been exceeded, and when a number of investors sought to withdraw their funds due to growing concerns, the fund was unable to meet those redemption requests and was suspended.
To add insult to injury, it has been reported by various media outlets that the FCA were aware of concerns about how the Fund was being managed as early as 2015 and failed to take action.
While the precise scope and direction of the FCA investigation remains unclear, it is expected to focus on the role of Link Fund Solutions. The firm, in its previous life as Capita Financial Services, saw the collapses of two other investment funds – Arch Cru (£32mpaid to investors as part of a settlement in 2012) and Connaught Income Fund Guaranteed (£66m paid to investors in 2017).
Despite Link being publicly censured and ordered to pay out by the FCA following the collapse of the Connaught Fund, they somehow allowed the company and its directors to go on and oversee the £85m Woodford fund.
Investors feel cheated and have lost patience. It is no wonder then that many are now looking to take matters into their own hands and have sought legal advice.
There are a number of growing group actions at various stages in England, and our Financial Mis-Selling Unit at Thompsons Solicitors are the first and only firm north of the border progressing a group action on behalf of Woodford investors.
The FCA report may, or may not, shed light on exactly how this occurred, but the damage is done. The most important thing now is to ensure that those affected see justice done and are fully compensated for their losses. A group action against Link Fund Solutions, in their role as manager of the Fund, is the only way to do that.
Kieran Smith is an associate with Thompsons Solicitors: thompsons-scotland.co.uk/other-services/group-action-against-link-fund-solutions-in-respect-of-woodford-equity-income-fund-weif?utm_source=Press&utm_medium=Scotsman_Opinion&utm_campaign=WEIF+