Compensation plan for Neil Woodford investors revealed

Neil Woodford was one of the biggest names in the investment sector

Investors who lost money when a fund managed by big-name stockpicker Neil Woodford collapsed are in line for compensation.

The City regulator, the Financial Conduct Authority (FCA), said people who had money invested when the fund was suspended could receive a share of £235m in redress.

That would amount to about 77p in every pound they had invested.

For the money to be paid, investors will need to approve the plan.

Various other conditions will also need to be fulfilled, such as the sale of some assets.

Therese Chambers, from the FCA, said the proposal offered the best possible outcome for the 300,000 trapped investors who lost money.

Fall from grace

Mr Woodford was one of the UK's most high profile investment managers and when he set up his own managed fund, he came with an impressive reputation. He was as close to a household name as is possible in the world of investing.

Investors, ranging from ordinary people to pension funds, put money into the Woodford Equity Income Fund. At its peak, the fund was reportedly managing more than £10bn.

But as they became increasingly worried about the investments being made on their behalf, many withdrew their money. More than £500m was taken out in four weeks and in June 2019 the fund was frozen. It was later closed and is being wound up.

• The spectacular fall of fund manager Neil Woodford

The fund administrator which made that decision was Link Fund Solutions. As the authorised corporate director of the fund, it had a responsibility to ensure that the fund was being managed with appropriate levels of liquidity and risk, and that all investors were treated fairly.

The FCA said there were "critical mistakes and errors" made by Link in its duties. As a result, those who had money in the fund when it was suspended were left with a disproportionate share of the remaining assets that were less easy to access, and difficult to use to repay investors who wanted to leave. Nearly four years on, some of those assets remain unsold.

The FCA and Link Group have agreed a pay-out of about £235m to these investors, which is funded, in part, by the sale of the Link business. This is less than an earlier statement by the FCA, which suggested investors would get a share of £298m.

'Sorry episode'

Investors are receiving a letter now about the proposal, and should receive further information about the timetable of events in July. They will need to vote to approve the deal for payments to be made.

"It would be a surprise if Woodford investors didn't approve the deal given how long this has dragged on for," said Ryan Hughes, from investment platform AJ Bell.

"While it will take some time for this redress process to complete and for payments to be made, investors are one step closer to being able to finally put this whole sorry episode to bed."

The events leading up to the fund's collapse in October 2019 are still being investigated by the FCA in what it described as a "complex" inquiry. The saga also prompted separate lawsuits on behalf of investors.

Mr Woodford has said he was "very sorry for what I did wrong", but has criticised the decision by Link to suspend the fund.