Hope of a settlement for Woodford investors  

More than four years after Neil Woodford’s Equity Income Fund was suspended and then closed, investors could receive a first settlement payment in the first quarter of 2024 – by Christian Leeming

Following action by the Financial Conduct Authority, fund administrator Link Fund Solutions has agreed to a settlement of up to £230 mllion; the first payment will be between £180 million and £200 million. 

The FCA claims that the loss incurred by investors is up to £298 million; the proposed total amount to be paid through the settlement scheme is up to approximately 77% of the total losses 

Settlement is contingent on investors voting to accept the offer before the 4 December deadline; a majority is needed from investors representing 75% of the fund’s assets at the time of the suspension on 3 June 2019. 

Investors holding units in Woodford Equity Income (WEIF) on 3 June 2023 are due to receive a letter outlining key actions and dates. 

The court convening hearing for the scheme is listed for 10 October; Link Fund Solutions will ask permission to call a meeting for investors to consider and vote on the scheme. 

The proposed settlement fund will be made up of all of Link Fund Solution’s assets following the sale of the business, plus a voluntary contribution from parent company, Link Group, of £60 million, and insurance proceeds of £48 million. 

Link Group, will also voluntarily contribute £2.5 million towards the costs of implementing the scheme. 

The net asset value of WEIF when it was suspended was approximately £3.6 billion so if the settlement fund is distributed in full it is estimated that investors will receive about 80% of the net asset value suspension; this takes into account what has been paid to investors to date and the most recent quarterly valuation of the remaining assets of WEIF to be sold.  

If the scheme passes, all investors, including those who voted against the scheme or abstained, will be automatically included and the settlement fund will be divided between them proportionally based on the number and class of shares they held at suspension.    

In return for that payment, affected investors will no longer be able to make any claim against Link Fund Solutions (and its parent company Link Group) and other related parties relating to the WEIF.  

The FCA says the settlement scheme offers investors considerably more than is otherwise available from Link Fund Solutions alone and more than would be achieved by any other means. 

If the settlement does not pass, the dispute could drag on for many years, as a legal battle could take place where Link will defend itself against the claims. 

If Link were successful in that defence, it may not be required to pay anything to investors, or less than under the settlement. 

Even if it was unsuccessful, the money available would be less than available under the current settlement as the voluntary contribution of up to £60 million from Link Group will not be paid, and the cost of the dispute may also be significant, thereby reducing the amount available to investors.