Woodford investors target Hargreaves Lansdown and Link

Thousands of Woodford investors issue claims against Hargreaves Lansdown and Link Fund Solutions

On Friday, 14 October 2022, several thousand claimants represented by Wallace issued High Court claims against Hargreaves Lansdown Asset Management Limited (“HL”) and Link Fund Solutions Limited (“Link”) to recover losses they suffered following the collapse of the LF Woodford Equity Income Fund (“WEIF”) in 2019.
The claim has received extensive media coverage in, among other new outlets, The Mail on Sunday, Reuters and the Financial Times (subscription required)
WEIF was an open-ended investment fund launched on 2 June 2014 by Neil Woodford, the well-known ‘stock picker’. Having had average or below average performance during 2016 and 2017, the performance of the fund dipped dramatically over the course of 2018 and into 2019 and investors began to redeem their shares at an escalating rate.
It emerged that the proportion of WEIF’s portfolio invested in FTSE 100 companies had been plummeting for some time, whereas holdings in volatile and illiquid shares in a variety of AIM-listed and unquoted companies had significantly increased.
On 3 June 2019, Link Fund Solutions Limited (“Link”), WEIF’s FCA-authorised corporate director (“ACD”), determined that the fund was not able to meet redemption requests in an orderly manner and therefore suspended the fund so that investors could not redeem their shares. On 15 October 2019 Link confirmed that the fund would be wound up through the liquidation of its remaining investment portfolio.
That process is ongoing. However, investors have suffered substantial losses because the fund’s assets are worth significantly less than they were when those investors subscribed for their shares. Investors may also have suffered other recoverable losses, for example the loss of opportunity to secure a better rate of return on their capital elsewhere had they not invested in WEIF.

Claims against Hargreaves Lansdown

HL operates a platform enabling customers to make investment decisions directly, without the services of a financial adviser. Its clients hold investments through an HL account. At the point of WEIF’s suspension, 133,769 HL clients owned shares in it worth £1.091bn and a further 157,751 of HL’s clients were indirectly exposed because they owned shares/units in other funds that had an underlying exposure to WEIF.
HL formerly operated a 'best buy' list of recommended funds known as the 'Wealth 50' (previously the ‘Wealth 150’) ranking which, it asserted, helped investors make informed choices about the quality of fund in which they chose to invest. WEIF featured on HL's Wealth 50 ranking from its launch in 2014 and remained there until 3 June 2019, the day on which it was suspended..
HL continued to promote WEIF during that period despite the fact that WEIF's performance relative to the FTSE All-Share Index declined sharply over 2017-2019. HL also appears to have known of certain liquidity and portfolio imbalance issues within the fund since at least November 2017 (and, it is to be inferred, potentially much earlier).
In the wake of the suspension and subsequent liquidation of WEIF, HL has obvious questions to answer as to why it failed to update its clients as regards developments in WEIF and continued to promote the fund, including by retaining it on the Wealth 50 list, despite being aware of the acute liquidity and portfolio imbalance issues it was facing. HL has since entirely overhauled the Wealth 50 list and replaced it with a new ‘best buy’ list.
Retail investors who relied on information provided by HL (whether made available on its website or in regular email updates it sent), including the Wealth 50 and its precursor the Wealth 150, in deciding to invest (or retain their investments) in WEIF have claims against HL. Those claims are predicated on the contention that HL was not reasonably justified in continuing to promote WEIF until as late as 3 June 2019, had no reasonable grounds for its belief that WEIF was appropriate for inclusion in the Wealth 50, and failed to keep clients reasonably informed about HL’s own growing concerns about WEIF.

Claims against Link Fund Solutions

In breach of its obligations as the ACD of WEIF, pursuant to the FCA’s Collective Investment Schemes Sourcebook Rules (“COLL”) and as contained in WEIF’s Prospectus, Link permitted a fundamental (and impermissible) shift in the asset portfolio of WEIF away from well-established UK equity income securities towards increased holdings in smaller and unquoted (and therefore highly illiquid and risky) companies. In turn, the dramatically diminishing net asset value of WEIF’s underlying risky investments caused by their poor performance, and its inability easily to divest its holdings in unquoted and illiquid securities to meet investor redemption requests, led directly to its suspension and liquidation.
Accordingly, investors in WEIF (regardless of whether or not they invested through HL) also have strong claims against Link based on the above-mentioned breaches.

Next steps

We have partnered with RGL Management Limited (“RGL”), a highly experienced, FCA regulated litigation management business that specialises in building and managing group litigation claims against large financial institutions. Like us, RGL has strong existing relationships with third party litigation financers and ATE insurers, including those which have significant experience in financing substantial group actions in the UK. We consider that our legal expertise (together with Leading and Junior Counsel from a leading commercial set of chambers) and RGL’s experience and know-how presents a formidable combination.
Together, we have assembled a group of thousands of retail investors who have issued claims against HL and/or Link as co-defendants in a single Court claim. Substantial group claims afford clients negotiating leverage that individual claims simply cannot match.
If you have invested in WEIF in the past (through HL’s online platform or otherwise) and suffered loss and/or have remaining capital tied up in the fund that you cannot access, you may be entitled to join the current issued group claim to recover your loss.
For more information, please click here to visit RGL’s dedicated website. In order to join the group, you will need to complete a short questionnaire and sign a formal litigation management agreement authorising RGL to issue proceedings against HL and Link on your behalf.
To learn more about the claims and Wallace’s expertise in this sector, please click here.