Judge approves compensation for Neil Woodford investors

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

A High Court judge has approved a £230m redress scheme for investors trapped by the collapse of a fund run by the big-name stock picker Neil Woodford.

About 300,000 people lost money when the Woodford Equity Income Fund was frozen in 2019.

Almost 94% of investors backed the compensation scheme in a vote in December, although only 54,000 voted.

But campaigners say the court's decision is an "appalling outcome" and are considering an appeal.

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 reportedly managed 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 wound up.

• The spectacular fall of fund manager Neil Woodford

The redress scheme was proposed by Link Fund Solutions (LFS), the former authorised corporate director of the fund. It comes after a Financial Conduct Authority (FCA) investigation and three investor groups filed lawsuits over the way LFS had managed the fund.

High Court Judge Jonathan Richards said in a ruling published on Friday that he saw no reason to contradict the conclusion of the "overwhelming majority" of investors.

If the scheme is implemented, it would hand an initial £183.5m payout this quarter.

The FCA, which backed the scheme, said investors could receive around 77p in every pound they had put in.

But campaigners say those calculations take in too narrow a view of losses.

The Transparency Task Force, which campaigns for some Woodford investors, said it offered an "appalling outcome" for those affected, with many "unintentional consequences" off the back of it.

Its founder, Andy Agathangelou, said: "Most [investors] will get back between four and eight pence in the pound of their outstanding capital losses, with nothing for the returns forfeit over the past four and a half years, let alone consequential losses."

It is considering an appeal against the court's approval, arguing that it removes legal protections for individuals.

Ryan Hughes from the investment platform AJ Bell said investors would be "breathing a sigh of relief".

"While there may be an appeal which means we aren't quite there yet, the fact that the judge has approved the scheme is a key milestone.

"With each new step taken investors will just hope this whole saga can be brought to a conclusion," he said.