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Former money manager and star stockpicker Neil Woodford urged the UK Financial Conduct Authority against closing his fund, warning that it would cause “needless and significant investor detriment”.
Woodford opened his eponymous firm Woodford Investment Management in 2014, before his flagship Equity Income fund was suspended in June 2019. Its winding-up was announced later that year, on October 15.
Some 300,000 investors were left in the £3.6bn fund when it was suspended, in what became one of the UK’s biggest ever retail investment scandals. The FCA said in 2023 that a redress scheme would enable investors to recover around 77p in the pound.
A letter sent to the FCA by Woodford Investment Management’s lawyers on October 14 2019 showed that WIM urged the financial regulator against closing the fund, warning that it would crystallise bigger losses for investors than if it were restructured and reopened.
The letter, seen by the Financial Times, claims that Woodford and his team only found out that day about the decision to wind down Woodford Equity Income — less than 24 hours before the process was publicly announced by the company’s administrator, Link Fund Solutions.
The letter warned that WIM considered “the risk of needless and significant investor detriment [ . . . ] substantial” in winding up the fund and that WIM “should be allowed an opportunity to provide meaningful comment to Link and to the FCA before what may be an erroneous step, and certainly an irreversible one with very serious consequences for investors”.
The emergence of the letter comes as Woodford and WIM appeal a decision by the FCA to fine the former manager £5.9mn and £40mn respectively for alleged failures in managing the fund, as well as a ban on Woodford from holding similar senior roles.
WIM also claimed in the letter that Link had in effect “frozen” it “out of discussions regarding the proposed future of the fund”, adding that Link “has not responded to frequent and persistent requests for senior management engagement” over the months running up to the closure announcement.
Link had suspended the fund in June 2019 to allow Woodford to offload stocks and raise money for investors who had sought to withdraw their investment, following a period of turbulent performance and institutional redemptions. In letters to investors in June and August that year, Link said it expected the suspension to end by early December.
The lawyer’s letter from October 14 said WIM “endorses that timeframe and indeed still views it as being realistic”, in terms of selling enough of the fund’s stock to prepare it for reopening.
The letter warned the FCA that winding up the fund “will result in far greater investor prejudice” because those left in the fund would likely receive a lower value from the sale of assets “than will a temporary suspension and restructuring and [WIM’s] engagement with investors continued to favour this course of action”.
WIM “implores the FCA to suspend temporarily the winding up . . . to allow discussions to take place between our client and the FCA and/or Link”, the letter added.
Link and the FCA declined to comment.
Woodford Investment Management said in a statement: “The concerns that we expressed to both Link and the FCA, that winding up the fund would cause significant investor harm, proved justified.
“However, the liquidation, and how it caused avoidable loss to investors, did not form part of the FCA’s six-year investigation.”
