The financial watchdog has hit back at claims it put pressure on administrators to close Neil Woodford’s flagship fund because the scandal surrounding its suspension was undermining confidence in the industry.
Link Fund Solutions, which was responsible for overseeing the suspension of the £3bn Equity Income Fund (WEIF), announced on Tuesday that the fund would be liquidated, triggering the collapse of Woodford’s investment empire later that day.
The Financial Conduct Authority (FCA) today dismissed claims it had pressured Link to shut down WEIF as “categorically untrue”.
The Sunday Times reported that Link had come under increasing pressure from the regulator to close the stricken fund because the scandal was denting confidence in the fund management industry.
“There was no pressure from the FCA put on Link to wind down the Fund,” a spokesperson for the watchdog told City A.M.
A spokesperson for Link said they “can’t comment on what is in the FCA’s mind”, adding: “investor interests are the absolute paramount concern for Link”.
WEIF was frozen in June after becoming overwhelmed by withdrawal requests, sparking the biggest crisis in the investment industry for a decade. The fund was unable to meet redemption requests because of its large proportion of illiquid holdings.
FCA head Andrew Bailey accused WEIF in July of “following the letter, but not the spirit” of the rules governing liquidity.
As authorised corporate director of the fund, Link had been tasked with repositioning the fund’s portfolio, but said on Tuesday that it had been unable to sell enough of its illiquid and unquoted assets to allow WEIF to reopen in December as planned.
Link also fired Woodford as WEIF’s manager, and stripped his name from the fund. A few hours later, Woodford announced he had resigned as manager of his Patient Capital Trust and Income Focus Fund, and shuttered his investment firm shortly after.
City A.M. understands that Link’s decision to shut down the fund took Woodford by surprise, and that the former star stockpicker was preparing to make a case for keeping WEIF open, arguing that progress had been made in reducing illiquid assets.
Link has also denied claims, first reported in the Sunday Times, that it had been preparing to close WEIF since July. A spokesperson for the company told City A.M. the claims were “completely and categorically untrue”.
“The decision to close the fund was taken in the immediate run-up to the announcement,” they said.
Link declined to comment on reports that its managing director, Karl Midl, had made inquiries about appointing Blackrock to liquidate WEIF’s large-cap holdings in July. Blackrock was appointed by Link to sell off WEIF’s listed assets last week.
“Investors’ interests are best served by actually having contingency planning going on at every stage of this process. It would be remiss not to do so. That categorically does not mean a decision was taken in July to appoint Blackrock,” the spokesperson said.
Woodford declined to comment on the reports.
Main image credit: Alamy