The manager of Neil Woodford’s failed investment fund announced plans to return £20 million to investors. However, he also disclosed that the remaining tech holdings have been severely damaged by the market slump this year. Therefore, this put an end to expectations for further payouts.
So, what is the Woodford investment scandal?
Three years ago, many investors suddenly discovered that they were unable to retrieve the money they’d invested with renowned fund manager Neil Woodford.
Mr. Woodford is one of the most well-known stockpickers in the UK. Later, he came with a solid reputation when he established his own managed fund.
He started and established his name at Invesco Perpetual. At this time, anyone starting a pension fund with him would have seen it rise to $250,000 by the time Neil Woodford left and began his own business.
Both pension funds and regular investors contribute to the Woodford Equity Income Fund. Moreover, so far we know the fund purportedly managed more than £10 billion at its height.
However, several investors withdrew their money later. They thought that the organization was making investments on their behalf. As a result, they grew more concerned about it. In fact, investors withdrew funds worth more than £500 million in just four weeks.
Link then stopped the fund on June 3, 2019, which was three years ago. And finally, the fund later collapsed.
Link’s role throughout this time
LFS of the Link Fund Solution, the administrator of the fund has been facing a lawsuit in this matter. Lawyers have alleged that Link has so far failed to properly manage and supervise the investments.
According to Daniel Kerrigan, senior associate at the London company Harcus Parker, which is pursuing the lawsuit, “Link was in place to work as the referee.” “However, they allowed the fund to derail.”
Therefore, Link owes it to the investors to guarantee that the fund is responsibly managed and not too hazardous. They claim that it has breached these obligations. For example, when the fund chose to invest in unlisted start-ups rather than sizable, dividend-paying stocks.
On the other hand, Link asserts that it has worked within rules. Moreover, it will “vigorously defend” against the allegations.
According to one of its representatives, acting in the best interests of all investors in the Woodford Equity Investment Fund was, and is, a key obligation of Link.
Further, he added that Link will continue to behave in compliance with existing laws. Moreover, taking “this and its other duties” very seriously, it’ll work in the best interests of all investors.
The High Court will decide whether we can blame Link for the fund’s final collapse three years ago. However, neither Mr. Woodford’s company nor himself are not the subject of the lawsuit.
What does Neil Woodford have to say about this scandal?
Neil Woodford expressed his embarrassment in public last year. He told The Daily Telegraph that he was “extremely remorseful for what [he] did wrong.”
He further added, “I can’t feel bad about the things I chose not to do. Neither the decision to suspend the fund nor the decision to liquidate the fund was mine. History will now show that such choices, which were not mine, severely harmed investors.”
Since then, Mr. Woodford tried to launch a new investment company, albeit not everyone has embraced it.
The FCA has been conducting its own inquiry into the collapse of the fund. It also gave a warning to Link last month that Link could face a bill of up to £306 million for improperly managing the Woodford Equity Income Trust’s liquidity prior to the trust’s freezing. As a result, the administrators have decided to pay £20m to investors.
Woodford fund manager set to pay back to burnt investors
Link Fund Solutions announced in a letter to investors that it will start returning the money to them by way of a capital distribution the following month.
Thus, investors will have received a total of £2.56 billion since the fund’s winding up began after this fifth capital payout.
However, rising interest and slow economic growth have harmed the value of the companies. Thus, investors have received reminders that assets left to be sold are the less liquid assets. Moreover, some of them might not be sold until mid-2023.
Benevolent AI is responsible for a sizable percentage of the fund’s most recent writedowns. It’s a drug discovery business that went public in Amsterdam this year. So, after poor results from developing new medicines, its shares dropped from €8 to €3.91. Also, the value of the fund’s interest decreased by £31.2 million. So, we can assume that it’ll be difficult for investors to get their further payouts.