FTSE 100 giant Hargreaves set for High Court over £3.8billion Neil Woodford funds meltdown
Three YEARS after MoS warned disgraced guru’s risky empire was ‘toast’, a dramatic breakthrough brings hope for thousands of victims
HARGREAVES Lansdown, one of the 100 largest firms listed on the UK stock market, faces a potentially costly High Court battle over its controversial involvement in the Woodford investment debacle, The Mail on Sunday can today exclusively reveal. The dramatic development in the Woodford saga unfolded late on Friday. This is when a claim was issued in the court on behalf of thousands of investors who lost money as a result of the closing and subsequent dismemberment of multi-billion pound investment fund Woodford Equity Income, run by high profile manager Neil Woodford.
Dealings in the £3.8billion fund were suspended in June 2019 as a result of it being unable to meet a £238million redemption request from Kent County Council.
Woodford, for many years considered one of the country’s top stock pickers, was subsequently removed as the fund’s manager (three years ago yesterday), the fund closed and most of the assets were sold off in a fire sale, crystallising losses for 300,000 investors. Since the fund’s closure, some £2.5billion has been returned to investors.
The claim on Friday was issued by litigation specialist RGL Management on behalf of 3,200 investors caught up in the scandal. It represents the ‘first stage’ of a group action which could result in financial redress for Woodford fund victims.
What makes RGL’s claim so sensational is its targeting of wealth platform Hargreaves Lansdown. Other Woodford related claims already lodged in the High Court by rival firms Harcus Parker and Leigh Day have been against Link Fund Solutions, a subsidiary of Australian based Link Group.
Link Fund Solutions is the company that as ‘authorised corporate director’ oversaw the Woodford fund on behalf of investors and was meant to ensure Neil Woodford stuck to the fund’s investment mandate of investing primarily in a portfolio of income-producing UK equities.
It failed to do so, resulting in Woodford being allowed to assemble a portfolio skewed towards illiquid – and hard to sell – investments, culminating in its suspension three and a half years ago. Many of these illiquid investments assets proved to be disastrous investments.
RGL’s decision to target Hargreaves Lansdown as well as Link represents a significant development in the quest to get financial justice for many of the 300,000 investors who had their investments frozen in June 2019.
This is because there are concerns over Link Group’s ability to meet any successful claim in the court – or pay redress demanded by City regulator, the Financial Conduct Authority.
Last month, the FCA issued a
‘warning notice’ to Link Fund Solubelonging
At this pace, Woodford’s victims may NEVER win
So when will Woodford investors see a payout?
tions after it concluded (but did not publish) its long drawn out investigation into the circumstances surrounding the closure of Woodford Equity Income.
The regulator said it was minded to impose a £50million fine on Link, plus require it to pay redress to Woodford investors of up to £306million (around £1,000 per investor).
The warning prompted Canadian company Dye and Durham to pull out of a takeover of seven firms
to Link Group – Link Fund Solutions among them – because it had been told it potentially would have to bankroll any redress if it went ahead with the takeover.
In contrast, Hargreaves Lansdown is very much in rude financial health. Although its profits tumbled in the first half of this year by 26 per cent, they were still a healthy £269.2million. Unlike Link, it has the financial wherewithal to pay any compensation if RGL’s claim goes to trial and is successful. RGL expects its claim against both Link and Hargreaves Lansdown to be in ‘excess of £100 million’.
Of the 3,200 investors included in the first stage of RGL’s claim, 2,800 were Hargreaves Lansdown customers at the time the Woodford fund was suspended. On Friday, James Hayward, chief executive of RGL, told the MoS: ‘We are pleased to be filing this first tranche of claims, providing a route for those affected to secure redress from both Link Fund Solutions and Hargreaves Lansdown, whose respective unlawful conduct resulted in significant losses for Woodford Equity Income