Burnt investors in Neil Woodford’s collapsed investment fund should reject the “bad deal” tabled by regulators and instead pursue their own compensation, the law firm litigating against the fund has said today.
The former star stock picker’s eponymous investment vehicle left investors millions of pounds out of pocket in 2019 when it imploded amid a flood of withdrawals.
Investors have been chasing compensation from the fund’s administrator, Link Fund Solutions, due to its role mismanaging the liquidity of the vehicle, with the Financial Conduct Authority in April backing a £235m proposed payout in April.
However, in a potential blow to the scheme, Harcus Parker – which represents investors who have been left out of pocket – today said that investors should reject the proposal as it is less generous than has been described.
“We are determined for people to go into the vote knowing the full facts so that they can make an informed decision,” said Harcus Parker partner Damon Parker.
“It is our view that the information supplied by Link and the Financial Conduct Authority has not been written in a way that easily reveals its meaning. And we struggle to understand how they reach some of their calculations.”
Central to the law firm’s advice to reject the Woodford redress scheme is the belief the vast majority of private investors would be better off claiming through the Financial Services Compensation Scheme (FSCS), where they could earn up to four times the amount proposed by the FCA.
The Financial Conduct Authority has already found that Link made “critical errors and mistakes” in its role managing the Woodford fund, which should allow investors to claim their money from the FSCS.
Harcus Parker’s call to reject the deal comes after a group of MPs this week similarly took aim at the FCA over the payout scheme and said it is “failing” those looking for redress.
In particular, it raised concerns about the proposed redress scheme for the affected investors, saying the FCA “materially understates the true extent of the sums lost”.
The FCA said the scheme will ensure that investors receive 77p in the pound. However, to reach the 77p figure, the FCA focused on the extra losses suffered by gated investors on illiquid investments compared with clients who exited immediately before withdrawals were blocked.
The watchdog has rejected the claims however and warned that pursuing the FSCS route could leave investors with nothing.
“As we have made clear, this redress scheme offers the quickest route for redress for the vast majority of people,” an FCA spokesperson said.
“Payouts through other means such as litigation or the FSCS are not guaranteed and will likely take longer to achieve. We firmly believe that what is being offered by Link warrants serious consideration by investors.”