Neil Woodford Fund Collapse Leads to £100 Million Claim Against Link

The fund administrator of former star manager Neil Woodford is facing a UK lawsuit of more than £100 million ($122 million) after lawyers reported that the number of potential claimants has exceeded 20,000.

Lawyers asked a London court on Monday for permission to launch a collective lawsuit against Link Fund Solutions in connection with the dramatic downfall of the Woodford equity income fund. Link blocked investors from withdrawing their money from the fund in 2019, and is now facing a penalty from the UK regulator as well as claims for reimbursement of hundreds of millions of pounds.

Derrick Dale, a lawyer for the claimants, emphasized the need to closely examine Link and the events that led to the suspension of the fund. He stated, “We need to look into what Link was doing, what it wasn't doing, and how it allowed the fund to reach a point where it had to be suspended.”

The Woodford fund's downfall has been a major issue for Link Administration Holdings Ltd. since it left £3.7 billion of investor funds frozen. Negotiations to sell the business were halted after the Financial Conduct Authority cautioned of a potential £50 million fine.

The lawyers representing the claimants stated that the typical investment in the fund was usually between £10,000 and £25,000, although some investments were much higher.

Attorneys representing Link asserted that the allegation was baseless. In a legal document, they contended that it was too early for a judge to permit the lawsuit to move forward as a collective, noting that it would have permanent repercussions for the legal proceedings.

The two sides are expected to clash over how much of the rapid reparations could have been anticipated.

Dale noted in a filing that the management of the fund was marked by a careless distribution of risk and, particularly, an excessive amount of investment in hard-to-value stocks, speculative stocks, and small-cap stocks.

In the spring of 2019, the fund had plans to redeem a large portion of the Woodford fund, but they encountered an "unanticipated demand" from an English council. According to Link's attorneys, a "redemption request of this magnitude was unprecedented."