As soon as revered as a star fund supervisor, Neil Woodford’s title is now extra notorious within the funding trade. Virtually 5 years have now handed for the reason that Woodford Fairness Earnings Fund was suspended, leading to round 300,000 folks dropping cash.
In February this yr, a Excessive Court docket decide authorized a compensation scheme to present Woodford Fairness Earnings traders some redress. This fee is on high of the cash traders already obtained from the sale of the fund’s investments.
The primary of the compensation funds is being delivered from 28 March.
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How a lot compensation will Woodford traders obtain?
Following the February ruling, the Woodford compensation scheme will see traders obtain as much as £230 million. The fee being delivered from 28 March is the primary and largest, coming in at £185.7 million.
The administrator, Hyperlink Fund Options, has stated that IT expects additional, smaller funds to be made as soon as its “closing money place and different prices and liabilities are recognized”. On 14 December final yr, IT confirmed that traders had voted overwhelmingly in favour of the scheme.
Buyers have already obtained £2.56 billion in compensation prior thus far via the sale of the fund’s investments. This, mixed with the £230 million payout, will take traders to round 80% of the worth of their funding from the day of suspension in 2019.
The administrator has contributed £60 million to the compensation pot.
Is the Woodford compensation sufficient?
“This settlement scheme just isn’t with out controversy”, says Ryan Hughes, interim investments managing director at AJ Bell. Though an amazing majority of traders voted in favour of IT (94%), many might be left with a bitter style of their mouth – and most will merely need the entire debacle to be over.
In Hughes’ view, the vote displays the truth that most traders recognise this as “their greatest probability of receiving some type of redress”. The FCA has stated one thing to an analogous impact, stating: “The FCA considers the Scheme to be the quickest and greatest strategy to return as a lot cash to traders as attainable in comparison with different means”.
Whereas the overall compensation now quantities to round 80% of the fund’s worth on the time of suspension, IT is price remembering that many traders may have misplaced cash prior thus far because of poor efficiency.
What occurred to the Woodford Fairness Earnings Fund?
Woodford was as soon as often known as a star fund supervisor, and plenty of traders flocked into his fund on account of his sturdy fame. His flagship fund had belongings price greater than £10 billion at its peak.
Woodford held many small, personal companies in his fund – which prompted liquidity considerations from traders. When the fund began to underperform, extra traders wished to redeem their funds and Woodford couldn’t exit his positions within the illiquid holdings shortly sufficient.
Because of this, the redemptions have been suspended in June 2019, which means traders couldn’t entry their cash. The fund was later closed and traders at the moment are being compensated for a few of their losses.
