ALEX BRUMMER: Woodford investors should not have been forced to wait four years for fund justice
Nearly four years have passed since Neil Woodford’s investment empire imploded, causing heavy losses for 300,000 investors. There is now light at the end of a long tunnel.
After hard work by the city regulator, the Financial Conduct Authority (FCA), Link Fund Solutions has managed to place the responsibility for the collapse on the shoulders.
As Authorized Corporate Director (ACD), Link watched as smarter investors deprived Woodford’s flagship Equity Income fund of liquid assets, leaving those left behind with assets that could not be easily valued or converted to cash.
Getting compensation back from Link was an arduous task due to changes in ownership.
As a result of negotiations with all parties, £235 million appears to be repatriated. It won’t be long before the complex scheme has to be approved.
Withdrawals: Neil Woodford has continued to withdraw large amounts from the Equity Income fund in recent months
As commendable as it is that the FCA has pursued Link to the other end of the world – owned in Australia – the experience has cast a shadow over the entire ACD system, with the city’s enforcer taking responsibility for depositors’ money delegates to a third party.
The fee means Woodford investors should get back 77 percent of their savings.
That doesn’t take into account the “opportunity cost” of investing in Woodford, when the same money could have yielded bountiful rewards elsewhere.
This should not be the end of a drawn-out story. The FCA investigation into the Woodford affair, including its own responsibility, is still classified.
To give the FCA the benefit of the doubt, this could well be a reflection of its regulatory and legal pursuit of some of the other parties involved, including Neil Woodford, who continued to withdraw large amounts of money from the fund in recent months .
Broker Hargreaves Lansdown has exposed many clients to the Woodford empire directly and through his own fund of funds, and by actively enticing people to pledge their money through his asset list.
The role of other peripheral players, including the custodian Northern Trust and the Guernsey International Stock Exchange, through which several unlisted stocks gained value, has yet to be unraveled.
Several stones remain unturned and there should be no excuse for the delayed report.
There is a contrast between the deadlocked review of the failure of Woodford’s billion-dollar empire and the fast-paced, nearly 500-page forensic investigation by former Supreme Court Justice Dame Elizabeth Gloster to London Capital & Finance. That only lasted 18 months.
Why are we waiting?
Savior alive
Big pharma is often a target for litigants. Johnson & Johnson is offering a $7.3bn (£5.9bn) settlement over allegations that talc causes cancer.
GSK and its former healthcare arm Haleon are in the process of disputing allegations about Zantac. And AstraZeneca is drawing fire for claims that its Covid vaccine, which has saved millions of lives, has caused heart problems and deaths.
Shareholder advisory service Pirc suggests Astra CEO Pascal Soriot faces lawsuits that could mean “financial or reputational damage” to the company and says his re-election should be resisted.
On those grounds, the same could be said of any life sciences boss.
What Pirc ignores is the transformation under Soriot’s leadership from drug minnow, under siege by Pfizer, to a world leader in immunological treatment.
It has catapulted the company to the top of the FTSE 100 with a valuation of £186.6bn, placing Shell at £167.3bn.
The drug pipeline makes it more valuable than Pfizer. Pirc should be ignored.
Drive zone
Full marks to engineer Melrose for bringing GKN Automotive back to the London Stock Exchange at a time when the city is bereft of new floats.
The new name Dowlais makes drive systems for vehicles. The concern, when it was bought by Melrose, was that British R&D could disappear abroad.
GKN, which made the cannonballs for the Battle of Waterloo in 1815, should continue to have a strong British presence.
Day one transactions were disappointing, but hopefully this won’t deter CEO Simon Peckham and Melrose financial engineers from seeking a UK listing for GKN’s aerospace arm in London.