‘I lost £100,000 to the Woodford collapse – and the nightmare isn’t over’
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Ian Duffield invested more than £200,000 in the Woodford fund and when the dust has finally settled, he is likely to have lost more than half of that figure.
The 69-year-old retiree is worried about what this will mean for his disabled wife when he dies, as there will be less left to her than he had previously hoped.
“I am effectively going to be leaving my wife significantly less than we expected. Of course, myself, in my retirement, that’s a lot of money to lose from what was supposed to be a relatively safe environment,” he said.
At its peak in 2017, the Woodford Equity Income Fund was worth more than £10bn, but by the time it collapsed this had fallen to just £3.7bn.
The fund, which was gated in June 2019, halting withdrawals, was administered by Link Fund Solutions, which acted as an authorised corporate director. This company was responsible for managing the liquidity of the fund.
Regulator the Financial Conduct Authority (FCA) opened an investigation following the fund’s liquidity crisis, after harsh criticism from the Bank of England and parliamentarians.
Woodford victims have received some but not all of their money back, as the fund was wound up, but many of more illiquid assets proved difficult to sell, meaning that there is still approximately £50m in the fund.
Investors have waited years for compensation and Link Group, the parent company of Link Fund Solutions, has voluntarily offered £60m to bolster what is paid out to consumers.
The company is eager to settle claims quickly using a scheme of arrangement, which is an agreement between a business and its creditors.
The FCA has strongly encouraged investors to support the compromise as the “quickest and best” outcome.
Investors have until December 4 to decide whether to rubber-stamp the scheme of arrangement, before a sanction hearing before the High Court in January.
The scheme will pass if it is approved by more than 50pc of investors representing 75pc of the remaining value of the fund.
But individual and retail investors feel that their dissenting voices will be drowned out by the larger institutional actors who will also get to vote.
Some investors believe that they could get higher payouts through other compensatory mechanisms, including the courts.
They are concerned that the small print of the scheme blocks them from making further claims against other parties involved in the Woodford scandal such as Hargreaves Lansdown, Britain’s biggest broker, which heavily promoted the ill-fated fund before it collapsed.
Mr Duffield is disappointed by the Financial Conduct Authority’s handling of the case, including its strong support of the scheme of arrangement.
He said: “We are staring into a situation where, fundamentally, the people I am most angry at after Woodford himself, are obviously Link Fund Solutions, who just let this go on, and the FCA. They were set up to protect retail investors and consumers.
“The FCA has been put in place to try and help protect us, and here they are backing this scheme,” he added.
Mr Duffield is not the only investor who feels abandoned by the regulator. Campaign groups have criticised the offer on the table, saying that it ties the hands of investors and that the FCA’s numbers do not add up.
In an open letter to the newly appointed City minister – Bim Afolami – Bob Blackman MP, chair of the All-Party Parliamentary Group on fairer finance, accuses the regulator of failing consumers.
The letter, signed by more than 300 supporters, demands a meeting with the minister in order to pressure the Treasury to help those affected and to begin an independent inquiry.
Banking campaigner Andy Agathangelou said: “The FCA is deliberately, unethically, unprofessionally, immorally and possibly even unlawfully engineering an outcome for the investors that will ‘save the FCA’s bacon’ but deny a fair and just outcome for the Woodford victims, if they get away with it.”
Investor Ben Harness said he thought the FCA’s endorsement of the scheme of arrangement was a “stitch-up”. He and his wife will receive just 12pc of their outstanding loss back if the scheme is approved, he said.
He said: “I was happy to ride out the fund performance – I know the risk of investing. Yet the suspension took that call away from me. The FCA is simply not fit for purpose.”
Others said the communications they have received from the FCA and Link Fund Solutions have been confusing and misleading.
Retired surveyor Graham Dickenson said investors weren’t aware that they were signing away their ability to take further action by voting for the scheme.
“Investors have not been adequately consulted, are faced with a baffling series of documents and the vast majority are simply not engaged, or are unable to engage,” he said.
Mr Dickenson also said that he believes that agreeing to the scheme would cut off any further chance of redress from another source.
“It will neatly package all of the regulatory and monetary shortfalls into a manageable bundle, allowing all of those responsible for protecting the life savings of consumers to escape and move on, with minimal reputational or monetary damage,” he added.
Woodford victim Martin Farrimond, 59, said he felt that the terms of the scheme hadn’t been properly explained to investors.
“The choices that in particular the retail investors are having to make have not been properly communicated. The implications of accepting this scheme of arrangement have not been properly communicated either,” he said.
“Along with all the other woes to the scheme is the fact that we are now finding out that the opportunities of pursuing other parties have been closed off to us. None of that has been communicated.”
Lawyers from firm Harcus Parker, which represents some of the investors who lost money, agreed that the wording of the scheme would make it practically impossible for creditors to pursue claims against institutional actors.
Damon Parker, of the law firm, said no funders would back future third-party claims because it would be “commercially nonsensical” to do so.
David Hamilton, a partner at law firm Howard Kennedy and a specialist in fraud and white-collar crime, said that while the scheme doesn’t stop third party claims, its structure would mean any successful attempts would receive less compensation.
“I think that’s the overarching issue,” he said, “it’s to avoid second bites of the cherry against Link.”
Mr Hamilton also emphasised that all investors would be bound by the scheme of arrangement, whether they voted for it or not.
A spokesman for Link Fund Solutions said: “LFSL continues to believe the scheme is the best option available for investors, both materially enhancing the amount of redress available from LFSL and providing the fastest route for redress possible.
“Without the scheme there is no guarantee of any compensation for investors who have already waited years for this to be resolved.”
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