1,000 reasons Woodford may be heading for judgment day...IN COURT
ALTHOUGH disgraced fund manager Neil Woodford may have disappeared from view – presumably to count the £8.7million of fees he purloined after controversially suspending his flagship Equity Income fund in June – investors caught up in the scandal refuse to lie down quietly. They want financial justice, and in particular those responsible for hyping the Woodford brand – fund platform Hargreaves Lansdown – to be held to account.
Over the past 14 days, hundreds of readers – all Woodford victims – have contacted The Mail on Sunday, confirming they intend to support a possible group action against Hargreaves Lansdown, being organised by law firm Leigh Day.
If the action goes ahead, it would be based on Hargreaves Lansdown’s failure to alert its customers to the increasingly illiquid nature of Equity Income’s investments which culminated in the fund’s sudden and unexpected closure in June. This ‘failure’ was compounded by the fact that the fund platform relentlessly pushed Equity Income and sister Woodford fund Income Focus – also currently suspended – as ‘best buys’ right up until June.
On Friday, Leigh Day said some 1,000 Equity Income investors, who bought the fund through Hargreaves Lansdown, had contacted the company expressing an interest in joining a possible group action.
Solicitor Kam Vojdani said the firm was still ‘investigating’ the feasibility of any legal action. He added: ‘We are taking evidence to establish whether there is a discrepancy between what Hargreaves Lansdown was saying to customers and what was happening in reality. In a nutshell, why did the platform appear to be saying positive things about Woodford Equity Income, but little that seemed to be negative until it was too late? We are trying to understand why the platform presented Woodford information in such a favourable way.’
He confirmed a decision on whether to proceed would be made in the next couple of weeks. If a group action is launched, it would likely be set up on a ‘no fee no win’ basis with Leigh Day earning its fees from any payout won. Any action may take more than two years to reach a resolution. Also, Vodjani did not rule out the group action embracing other ‘defendants’ – such as Woodford himself and Link Fund Solutions (the firm that oversaw management of the Equity Income fund). Hargreaves Lansdown refused to comment on the possibility of a group legal action being launched against it.
John Tebbey is among those who have already contacted Leigh Day to register interest in supporting a group action. Between them, John and his wife Sharynn, from Braintree, Essex, invested some £20,000 in Woodford Equity Income via Hargreaves Lansdown.
John, 75, a former IT salesman, says they are ‘terrified’ of losing their money. He adds: ‘We appreciate that stock markets involve risk, but never did we believe that Equity Income would effectively go into liquidation.’ The £3billion fund is currently being dismantled by investment managers Black Rock and PJT Partners, with investors such as the Tebbeys likely to start getting back some of their capital from early next year.
John says: ‘We feel totally let down by Hargreaves Lansdown. It actively encouraged us to stick with Woodford on the basis he had always managed to bounce back from periods of poor performance’ [he did this in the early 2000s while managing money for Invesco Perpetual].
‘This encouragement continued until the fund’s suspension. By then it was too late to do anything. Yes, our £20,000 investment may not be huge by some standards, but to us the losses we are going to crystallise are life changing – losses we will find impossible to recover, given we are both in our seventies.’
As for Woodford, John is damming. ‘We have total contempt for him. He dragged us into this financial disaster and then continued to make money from it – £8.7million of fees sucked from Equity Income after it was suspended. How can this be right?’
Terence Whitaker, from Leeds, West Yorkshire, has also contacted Leigh Day. Terence, a 67-year-old retired carpet estimator, invested £13,000 in Equity Income via Hargreaves Lansdown. He says: ‘I invested in Woodford when he was running funds for Invesco Perpetual in the 1990s and 2000s. He made me a few quid. So when he launched Woodford Equity Income, I had no problem in backing him.’
He adds: ‘What annoys me is that at no stage did Hargreaves Lansdown alert me to the fact that Equity Income’s portfolio was no longer living up to the fund’s title and investing in dividend-focused UK companies. Instead, it was heavily invested in illiquid, often unquoted, stocks. If I had known this, I would have got out. Yet Hargreaves Lansdown seemed more interested in selling more and more of Woodford.’ Terence is now in the process of transferring his investments with Hargreaves Lansdown to rival platform AJ Bell.
Steve Bowden, a 65-year-old retired swimming pool engineer from near High Wycombe in Buckinghamshire, is another Woodford investor signed up to the Leigh Day group action. He says: ‘If at any time Hargreaves Lansdown had removed Woodford from its best buy list, I would have sold my holdings. I now have no idea what my investments are worth and when I am likely to get any of my money back.’
Mike and Ann Connell have yet to make their minds up about supporting any legal action against Hargreaves Lansdown. But their retirement plans have been blown off schedule as a result of the £50,000 investment they have tied up in Equity Income via the platform.
Earlier this year, with Mike, 65, and looking to retire from work as a consultant in the hospitality trade, they bought a new house in Conwy, North Wales. But just as they signed on the dotted line, they learnt their money in Equity Income was locked in because of the fund’s suspension. Although they went ahead with the house purchase, Mike says the Woodford debacle has had a ‘terrible’ impact on their retirement finances.
On Friday, he said: ‘We are just a normal couple, not major investors, looking to enjoy the latter years of our lives after working hard since we were teenagers. We’ll survive this investment scandal but it’s so distressing. Hopefully, legal claims will be successful against both Hargreaves Lansdown and Woodford. And yes, he should be made to repay the £8.7million of fees that he has taken since Equity Income was closed.’ Absolutely.