FCA plans to deliver significant redress to Woodford investors
20th April 2023 10:14
by Jemma Jackson from interactive investor
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interactive investor comments on the announcement by the City regulator.
Dzmitry Lipski, Head of Funds Research, interactive investor, says: “The FCA’s announcement is a milestone moment for investors, who finally have some answers, accountability, and redress, should it be approved. Missing pieces to the jigsaw remain, but this is a big step in the right direction.
“Yet the announcement begs broader questions about open-ended funds investing in illiquid assets. By recognising that investors leaving Woodford Equity Income by 1 November 2018 benefited disproportionately from access to the most liquid assets, the FCA considers that investors who continued to hold Woodford Equity Income at the time of its suspension were treated unfairly, being exposed to a disproportionate share of the remaining assets which were more illiquid.
“This goes right to the heart of the liquidity issues, which can underpin open-ended funds investing in illiquid assets, given the potential for a liquidity mismatch. We have seen this time and again, and sometimes to damaging effect – and well before Woodford.
“As the first Long Term Assets Funds get off the ground, it will be interesting to see if the new structure really does get around the shortcomings of the open-ended fund structure for investing in illiquid assets. The proof will be in the pudding, but we are yet to be convinced.”
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