ALEX BRUMMER: Woodford investors’ long wait for fund justice

Nearly four years have passed since the investment empire of Neil Woodford imploded, leaving 300,000 investors nursing heavy losses. There is now light at the end of a long tunnel.

Assiduous work by the City regulator the Financial Conduct Authority (FCA) has managed to pin some responsibility for the collapse on the shoulders of Link Fund Solutions.

As an Authorised Corporate Director (ACD), Link stood idly by while smarter investors denuded Woodford’s flagship Equity Income fund of liquid assets, leaving those left behind with holdings which could not be easily valued or turned into cash.

Recovering compensation from Link has been an uphill task because of ownership changes. 

As a result of negotiations with all parties, £235million looks as if it will be repatriated. It will not be any time soon as the complex scheme needs approval.

As laudable as it is that the FCA has pursued Link to the other end of earth – ownership is in Australia – the experience has cast a shadow over the whole ACD system, under which the City enforcer delegates responsibility for savers’ money to a third party.

The recompense means Woodford investors should recoup 77 per cent of their savings. 

That takes no account of the ‘opportunity cost’ of being invested in Woodford when the same cash could have been reaping rich rewards elsewhere.

This should not be the end of a drawn-out saga. The FCA probe into the Woodford affair, including its own responsibility, is still under wraps.

To give the FCA the benefit of the doubt, this may well reflect its regulatory and legal pursuit of some of the other parties involved, including Neil Woodford, who was still extracting large sums from the fund in its dying months.

Broker Hargreaves Lansdown exposed many clients to the Woodford empire directly and through its own fund of funds, and by actively persuading people to commit their money through its wealth list.

The role of other periphery players, including depository Northern Trust and the Guernsey International Stock Exchange, through which several unquoted stocks were given a value, still has to be untangled. 

Several stones remain unturned and there should be no excuse for the delayed report.

There is a contrast to be drawn between the bogged-down review on the failure of Woodford’s multi-billion-pound empire and the swift, nearly 500-page forensic inquiry by former high court judge Dame Elizabeth Gloster into London Capital & Finance. That took just 18 months.

Why are we waiting?

Life saver

Big pharma is often a target for litigants. Johnson & Johnson is offering a settlement of $7.3billion (£5.9billion) over allegations that its talc causes cancer.

GSK and its former health care arm Haleon are busy contesting allegations about Zantac. And AstraZeneca is drawing fire over claims that its Covid vaccine, which has saved millions of lives, caused heart problems and deaths.

Shareholder advisory service Pirc suggests Astra chief executive Pascal Soriot faces litigation which could ‘financially or reputationally’ impact the company and says his re-election should be opposed.

On such grounds, the same could be said for every life sciences boss.

What Pirc ignores is the transformation under Soriot’s stewardship from drugs minnow, under siege from Pfizer, to a world leader in immunology treatment.

It has catapulted the company to the apex of the FTSE 100 with a valuation of £186.6bn, placing it ahead of £167.3billion Shell.

Its drugs pipeline makes it more valuable than Pfizer. Pirc should be ignored.

Drive zone

Full marks to engineer Melrose for returning GKN Automotive to the London Stock Exchange at a time when the City has been bereft of new floats.

Newly named Dowlais makes power systems for vehicles. The concern, when it was bought by Melrose, was that its British R&D might vanish overseas.

GKN, which made the cannonballs for the Battle of Waterloo in 1815, should continue to have a strong British presence.

The first-day dealings were disappointment but hopefully this will not dissuade chief executive Simon Peckham and financial engineers at Melrose from seeking a UK listing for GKN’s aerospace arm in London.