Link Group agrees £235m payout for Woodford investors
Australia's Link Group has agreed to pay out up to £235m to investors caught up in the collapse of the Woodford Equity Income Fund, it was confirmed on Thursday.
The Financial Conduct Authority said the payout would cover losses for over 300,000 investors in the WEIF, which was managed by Link Group’s UK business, Link Fund Solutions, and collapsed in 2019.
The sum agreed is less than the total losses of £298m, but the regulator urged investors to consider the offer, which would see them recover around 77p in the pound.
Therese Chambers, executive director of enforcement and market oversight, said: "The FCA’s investigation raised serious concerns about LFS’s management of the liquidity of the WEIF. LFS’s actions appear to have caused significant losses for those investors who remained in the fund when it was suspended.
"We believe the proposed scheme offers investors the best chance to obtain a better outcome that might be achieved by any other means, and it is in the investors’ interest they be given the chance to consider it."
The payment is dependent on the successful sale of Link Fund Solutions to Waystone Group. The Irish firm has conditionally agreed to buy LFS, excluding its Luxembourg and Swiss entities as well as the Woodford-related liabilities, for between £110m and £140m.
Vivek Bhatia, Link Group chief executive, said: "The sale of LFS significantly completes our simplification strategy, including a conditional settlement with the FCA.
"This outcomes creates greater clarity for our shareholders, providing a pathway to final resolution of the Woodford matters and further enabling the organisation to focus on the future growth of our core businesses."
A former star stock picker, Neil Woodford restricted withdrawals from the £2.9bn WEIF after values started to plunge, leaving investors unable to access their money. It was finally closed in October 2019, and the fund was widely criticised for holding illiquid assets that made it harder to meet redemption calls following months of underperformance.
Ryan Hughes, head of investment partnerships at AJ Bell, said: "Poor liquidity management meant investors were left with disproportionately high exposure to illiquid assets, which ultimate brought down the fund. The scale of this illiquidity can be seen today with some assets remaining unsold nearly four years later.
"It would be a surprise if 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."