Link Fund Solutions, which runs the LF Woodford Equity Income Fund, agreed to provide up to £235 million ($292 million) in damages to investors in the fund which was closed in 2019 due to liquidity issues.
The redress follows an investigation by the U.K.’s Financial Conduct Authority into losses by over 300,000 investors.
In June 2019, Woodford Investment Management suspended the trading of LF Woodford Equity Income Fund as a result of a declining performance and to avoid redemptions. Link Fund Solutions subsequently closed the fund in October 2019, citing uncertainty in repositioning the portfolio to meet investors’ redemption requests.
The FCA’s investigation found that Link Fund Solutions made “critical mistakes and errors” in managing the fund’s liquidity from September 2018, the financial services watchdog said Thursday.
The FCA said that investors who continued to hold investments in the fund at the time of its suspension were “treated unfairly because this left them with a disproportionate share of the remaining assets which were more illiquid.”
“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 than might be achieved by any other means and it is in the investors’ interests they be given the chance to consider it,” Therese Chambers, executive director of enforcement and market oversight at the FCA, said in a news release Thursday.
One of the investors in the fund was the £7.5 billion Kent County Council Pension Fund, Maidstone, Kent.
In response to the FCA’s announcement, the pension fund said in an emailed statement: “At this stage we need to assess the announcement and understand what impact it may have on the Kent fund. It is too early to make any further comment, and the FCA has suggested that it will provide an update in July 2023, and so there will be work be done to understand the Kent position ahead of that.”
The agreement is still subject to completion of a sale of the Link Group’s Fund Solutions business to the Waystone Group and the approval by the investors and the court.
