The aftermath of the Neil Woodford fund collapse continues to unfold, with investors now facing substantial fees for the compensation process. Over 300,000 individuals who lost money when the Woodford Equity Investment Fund imploded in 2019 are now shouldering more than £11.5 million in fees to receive compensation through a contentious scheme.
The fund, once valued at over £10 billion at its zenith in 2017, suspended operations in June 2019 due to severe liquidity problems. This event marked one of the UK's most significant investment scandals in recent years, highlighting issues within the fund management industry and prompting calls for regulatory reform.
According to a report by PwC auditors, the compensation scheme's costs had reached £11.5 million by July 31, 2024, with potential for further increases. The scheme, approved by a High Court judge in February 2024, aims to provide up to £230 million in redress, although the final figure could be as low as £185.7 million.
Investor participation in the scheme's approval was notably low, with only 20% of total investors casting votes. Of those who voted, 90% supported the scheme, raising questions about the overall representation of affected parties.
The compensation process has seen multiple payouts since the fund's forced wind-up in October 2019. Investors received their first payment from the new scheme in March 2024, bringing the total amount returned to investors to £2.73 billion. This figure represents a significant portion of the fund's peak value, but falls short of full recovery for many investors.
"The approval of this compensation scheme marks a significant step towards providing redress to investors affected by the Woodford fund collapse. We continue to monitor the situation closely to ensure fair treatment of all parties involved."
The collapse of the Woodford fund has had far-reaching implications for the UK's financial sector. It has led to increased scrutiny of other funds with similar investment strategies and prompted a review of fund management regulations. The incident has also highlighted the risks associated with open-ended funds investing in illiquid assets and the importance of diversification in investment portfolios.
As the liquidation process continues, some remnants of the fund's investments are still being sold. Recent transactions include the sale of Atom Bank for £3.5 million and multiple sales of BenevolentAI shares totaling approximately £1 million. However, the remaining fund assets are valued at just £34.5 million, with 13 out of 19 holdings now considered worthless.
The Woodford case serves as a stark reminder of the potential pitfalls in the investment world, even when dealing with once-celebrated fund managers. It underscores the need for robust oversight and the importance of thorough due diligence by both investors and regulatory bodies.
As investors await the possibility of further payouts, including the potential distribution of £44.7 million held in cash by the scheme, the financial industry continues to grapple with the lessons learned from this significant collapse. The next review of the compensation policy is scheduled for March 2025, leaving affected investors in a state of uncertainty for the foreseeable future.