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Woodford investors approve FCA-backed redress scheme

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Investors in Neil Woodford’s flagship fund have voted decisively to approve a controversial reimbursement scheme backed by the UK regulator, signalling an end to the four-year saga triggered by the collapse of the Woodford Equity Income Fund.

Ninety-four per cent of those who voted, including institutional investors, opted for the “scheme of arrangement” administered by Link Fund Solutions and supported by the Financial Conduct Authority, according to provisional results released by Link on Thursday. More than 54,000 investors participated in the vote, according to Link.

The final results will be published before a court hearing on January 18, which Link hopes will approve the result in order to begin the process of returning up to £230mn to investors. According to the FCA, this will mark the return of a total 77 per cent of money that was locked up in 2019.

Link Fund Solutions said the vote “demonstrated [investors’] strong support for the scheme”.

“This is an important step for the scheme, and the establishment of the settlement fund, which [Link] has always believed is the best option available for investors.” It “materially enhances the amount of redress available” and provides the fastest route” possible.

Roughly 300,000 investors had some £3.6bn stuck in the Woodford Equity Fund after its suspension in June 2019 in what became one of the UK’s worst investment scandals. The fund collapsed after a downturn deflated the value of its public equities, and its illiquid holdings meant it struggled to meet investor demands for redemptions.

The vocal minority of Woodford investors and advocates who campaigned against the deal reacted with shock at the scale of the vote. Critics alleged that the FCA had misled investors about other — potentially more lucrative — avenues for reimbursement, including litigation or a claim with the Financial Services Compensation Scheme.

“Un-fucking believable . . . I can’t believe my eyes,” one investor who voted against the deal wrote in an email.

“It’s such a bad result, it’s actually good”, said Andy Agathangelou, head of the Transparency Task Force, which campaigns for Woodford investors.

Agathangelou accused the FCA of spreading “misinformation” by equating the scheme to “77p in the pound” for investors, which he said did not include any losses sustained before the fund’s suspension, nor did it take inflation into account. He also claimed many investors found it difficult to vote.

“It will be easy to explain to the judge that the voting process was not legitimate [ . . . ] at the sanction hearing on January 18,” he added. “Game on; and we’re up for it”.

The FCA said: “This redress scheme offers the quickest route for redress for the vast majority of people. Payouts through other means such as litigation or the FSCS are not guaranteed and will likely take longer to achieve.”

The vote came a week after Bob Blackman, a conservative MP, told the Financial Times that he wanted to see an inquiry into the handling of the Woodford reimbursement process.

An FCA investigation found that Link made “critical mistakes and errors” in managing the fund’s liquidity, resulting in the fund failing to have a “reasonable and appropriate liquidity profile” from September 2018.

Ryan Hughes, interim investments managing director at AJ Bell, said: “While there will no doubt be some that feel that this scheme doesn’t compensate them sufficiently for their losses, others will feel that getting back around 80 per cent of the fund value on suspension will be more than they could have hoped for.”

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