Over the past year, I’ve written 60 articles that refer to the busted flush that is fund manager Neil Woodford. An individual who through a mix of arrogance and crass investment management wrecked the financial dreams of hundreds of thousands of investors by running his flagship investment fund Woodford Equity Income into the ground.
But not before extracting millions of pounds in fund fees, paid for by stranded (and heartbroken) investors. So far, despite the misery he has wreaked and continued interest in him and his failed business Woodford Investment Management (hence the 60 articles), he has not been held accountable for his actions – although the regulator (the Financial Conduct Authority) says it is still investigating the abrupt suspension of the £3.7billion Equity Income fund in June last year.
When this probing will be completed is anyone’s guess – the regulator wasn’t saying on Friday – but, even when it is, there is no guarantee Woodford will be punished or required to pay back the millions of fees he sucked from the fund while it lay closed. As one former fund investor told me last week: ‘This whole sorry saga needs closure.’ He’s right, it’s dragged on for far too long.
In charge?: So far, the Woodford investigation has been as transparent as Kim Jong Un
Certainly, the actions of Link – the fund’s authorised corporate director (overseer) – are not helping matters. Since Link took the decision to suspend dealings in Equity Income in June last year, its actions have aroused nothing but anger among investors. Indeed, some are now wondering who is the biggest culprit in this whole sorry affair – Woodford or Link?
Of course, the buck lies with Woodford for turning Equity Income into a fund that was equity income in name only, but Link has not covered itself in glory. For a start, it had known since 2017 that Equity Income’s portfolio was becoming increasingly illiquid as a result of Woodford’s fixation with questionable unquoted investments. But it did nothing to require him to address the issue.
Then, when it suspended the fund after Woodford was unable to fulfil a £238million redemption request from Kent County Council, Link said the portfolio would be repositioned around blue chip companies – and then reopened by the end of the year.
Of course, that never happened – Woodford was summarily fired in October and the fund broken into two. The managers appointed, mighty BlackRock and private equity specialist PJT Park Hill, were told to liquidate the stocks so that cash could be returned to investors.
Although £2.4billion has so far been returned – this includes an £183 million payment confirmed last week but not yet handed over to investors – the way in which the fund has been dismembered has attracted criticism. Investors have had to bear the cost of its break-up while some of the assets (especially the illiquid ones) have been sold, only to be resold by the buyers almost immediately at a profit (a process known as flipping).
There is now a remaining rump of some £290million of assets to be sold – although the fact these holdings have yet to be disposed of suggests they will probably be offloaded at a big discount.
It is hard to disagree with those who say Link has shown a total disregard for investors since the defenestration of Woodford. As one reader put it: ‘For all the transparency and accountability we are receiving from Link we might as well have Kim Jong Un in control of the fund.’ Harsh, but understandable.
With the FCA’s investigation proceeding at a pace reminiscent of Brian The Snail in The Magic Roundabout, it could be a while before both Woodford and Link are held accountable for their role in the demise of Equity Income. For investors, it is deeply frustrating.
Maybe, their best hope of ‘justice’ lies in a group legal claim launched against Link and Hargreaves Lansdown that recklessly continued to recommend Equity Income up until the day it was suspended.
Last week litigation specialist Leigh Day said it had identified ‘a compelling body of evidence’ against these two parties. Yet, it has yet to press the ‘go’ button on making a claim. Yet more frustration. Another 60 articles loom.