Partner Daniel Spendlove comments in FT Ignites Europe in relation to news that Woodford investors are seeking legal advice on how to deal with the closure of the flagship equity income fund and expected financial losses.
Daniel’s comments were published in FT Ignites Europe, 17 October 2019, and can be read here.
“On Tuesday, Neil Woodford announced that he was closing down his investment boutique, Woodford Investment Management, after Link Fund Solutions, the authorised corporate director on the £3bn (€3.5bn) Woodford Equity Income fund, told investors it was firing the manager with immediate effect and liquidating the firm’s flagship fund in the “best interests” of investors.
The closure brings to an end speculation on how one of the UK’s most celebrated stock-pickers would turn around the fortunes of his one-time £10bn fund, after it suspended trading in June this year amid poor performance and accelerating outflows.
Daniel Spendlove, partner at Signature Litigation, says it is “almost inevitable” that investors will consider claims.
“Investors in cases of this nature typically look to advance claims in misrepresentation,” he says.
“To succeed in those claims, investors must identify false or misleading statements made by the fund – in investor presentations, for example – which they relied on when making their decisions to invest.”
He says that bringing such claims involves overcoming exclusion clauses that “are usually widely drafted in favour of issuers”.
However, while each case is “highly fact specific, investors can draw comfort from the fact that those clauses are not always effective”, says Mr Spendlove.
“A key question, however, is whether the potential defendant to these actions will have the resources to meet a judgement against them,” he adds.
“This is usually one of the first considerations in cases where investors have suffered huge losses,” says Mr Spendlove. “There is simply no point in suing a party who is never going to be able to pay a resulting judgement against it.””
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