It is more than five years since Neil Woodford’s UK equity fund collapsed but investors are still scrambling to get their money.
In the latest twist in the long-running saga, which began when the once-celebrated portfolio manager’s flagship fund was suspended by the regulator in 2019, investors are now suing Hargreaves Lansdown.
More than 5,000 people who invested in the now-defunct equity income product are taking the investment platform to court over claims it continued promoting the fund even though it was aware of problems.
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Many reasons have been cited for triggering the spectacular closure of the investment fund, ranging from a series of badly performing stock choices to the loss of a hefty £250m investment mandate from Kent County Council.
But perhaps the underlying reason for the closure was Woodford’s over-reliance on large, illiquid assets that he bought to try and quietly improve the performance numbers of his fund; holdings that could not quickly be sold when investors started to request back their money in large numbers.
Holly Mackay, founder and CEO of Boring Money, says: “Woodford packaged his fund up as a korma, but under all the packaging it was turning into a vindaloo.”
Why are investors going after Hargreaves Lansdown?
Claims company RGL Management says the number of people taking part in a group High Court claim against the investment platform, which is to be sold for £5.4bn to private equity investors, has almost doubled to 5,000 over the past two years.
RGL said: “[The claim is for] investor losses sustained as a result of Hargreaves Lansdown’s conduct in continuing to recommend [the fund] right up to the day of its highly-publicised collapse, despite Hargreaves Lansdown being aware of the fund’s long-standing portfolio diversification and liquidity issues.”
Almost 300,000 people had invested in the fund via Hargreaves Lansdown, contributing to £1.6bn of the fund’s total £3.7bn.
Mackay says: “Hargreaves Lansdown is the largest DIY investment platform by a long way. And their opinion matters. So when their research team favoured a fund, retail investors bought it. The HL research team liked the Woodford fund and stuck with it, when others were bailing out.”
Hargreaves Lansdown declined to comment.
What other compensation is being given to Woodford investors?
Last year, investors trapped in Woodford’s flagship fund were offered up to £235 million in compensation after an investigation by regulators. The Financial Conduct Authority set out the compensation plan after ruling that Link Fund Solutions, which was the administrator for the fund, made “critical errors and mistakes”.
The FCA said errors in the administration of the fund had left it without the cash buffers needed to meet redemption requests.
Ryan Hughes, head of investment partnerships at AJ Bell, said at the time that the compensation offer “will come as significant relief for the thousands of investors who have been very patiently waiting for some form of compensation”.
However, Andy Agathangelou, founder of the Transparency Task Force, a campaign group, pointed out that "most [investors] will get back between just four and eight pence in the pound of their outstanding capital losses”.
Investors have already received £2.56 billion in compensation since the fund’s suspension date in 2019, from the sale of investments.
Seperately, it was also reported at the very end of last year that the Schroders Capital Global Innovation Trust formerly managed by Woodford when it was known as the Patient Capital Investment Trust, is facing a shareholder vote on liquidation after continuing to underperform.
How to join the Hargreaves Lansdown/Woodford litigation
There is still time to join the High Court claim against Hargreaves Lansdown as long as you invested in Woodford’s fund via the investment platform.
To do so you need to register on RGL’s website but be warned if the claim is successful 25% will be deducted from the gross proceeds by the claims management company.
Its website reads: “RGL’s claims can still be brought against Hargreaves Lansdown, even though the court approval of Link’s proposed scheme of arrangement means that claims can no longer be made against Link.”
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