Save, make, understand money

Experienced Investor

Woodford saga close to entering the ‘home straight’

Paloma Kubiak
Written By:
Paloma Kubiak

After months of waiting for an update, and four years after the collapse of the LF Woodford Equity Income Fund (WEIF), investors appear to be one step closer to achieving compensation.

As part of the latest update, Link Fund Solutions confirmed it has appointed PricewaterhouseCoopers LLP to advise it on the up to £235m redress scheme for the 300,000+ investors in the defunct fund now known as the LF Equity Income Fund.

It has also “entered into ongoing discussions” with relevant stakeholders to iron out the detailed terms of the scheme of arrangement, and has appointed Jamie Drummond-Smith to serve as independent chair of a committee of investors.

This appointment comes after letters were recently sent to investors of the WEIF requesting nominations to form an investors’ committee to work with Link Fund Solutions (LFS) to help design a “fair” redress scheme, as well as deal with claims against the group.

The letter revealed an independent chair would also be appointed to help guide the investors’ committee to work through the options and this person would be an “experienced financial services scheme expert”.

LFS said Drummond-Smith is a chartered accountant who spent 25 years with the accounting firm Deloitte, where he was a partner in the corporate finance group. He was also chairman of the creditors’ committees for the Amigo, Non-Standard Finance and Morses Club Schemes.

It will contact investors who expressed an interest in joining the committee in the coming weeks.

Formal launch of the redress scheme

Today’s letter also confirmed that subject to the outcome of discussions with Link Group and regulator, the Financial Conduct Authority (FCA), and the High Court’s availability, LFS expects to issue a ‘practice statement letter’ in September.

This will notify investors of the formal launch of the redress scheme; provide further details about the key terms of the scheme; and give details of the first court hearing in relation to the scheme.

Karl Midl, managing director, for and on behalf of Link Fund Solutions Limited, explained that at the first court hearing, the court will consider certain preliminary issues where it will then be asked for permission to hold meetings of investors to vote on the scheme.

However, the scheme is conditional on the completion of the sale of Link Group’s Fund Solutions business (including subsidiary LFS and other assets) to asset management service firm Waystone Group as noted in April’s update.

This is currently expected to complete in October 2023.

‘Investors waiting over four years for this point’

AJ Bell head of investment partnerships, Ryan Hughes, said investors will be pleased to see some clarity on the potential timeline of the £235m settlement and that the sale of Link is progressing as planned.

“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.

“With a number of distributions having been made to investors over the past three 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,” he said.

Hughes added: “While the letter still does not present a firm timeline for the payment of this redress, as it is still subject to the successful sale of the business, news that details of how the scheme will operate will be provided in September at least gives investors a date to focus on. That will no doubt be eagerly awaited by investors who have had to wait over four years to get to this point. While the finish line may not quite be in sight, it does seem as though the sorry saga is getting close to entering the home straight.”