More than 5,000 people who invested in Neil Woodford’s collapsed equity fund are suing Hargreaves Lansdown, claiming that the investment platform was still promoting the fund even when it was aware of its problems.
The number of people suing Hargreaves Lansdown, the UK’s largest investment site, has almost doubled in the past two years, according to the claims management firm RGL Management. Two years ago the number of people taking part stood at 2,750.
RGL said it expects the claims to total more than £200m, with the average individual claim, including interest, about £20,000.
The Woodford equity income fund (WEIF), the flagship fund run by the former star stock picker Woodford, failed in October 2019 after investors rushed to withdraw money in response to a raft of poorly performing company investments, including some hard-to-sell, illiquid assets. The fund was frozen and later closed and wound up.
About 300,000 people had invested in the fund, including 130,000 through Hargreaves Lansdown.
RGL filed an initial claim in the high court against Hargreaves Lansdown in London in October 2022. The firm said it was processing further claims and would file another tranche, with thousands more claims, by March. The number of claimants could reach 10,000.
RGL argues, on behalf of investors who lost their savings, that Hargreaves Lansdown continued to recommend the Woodford fund right up to the day of its collapse, even though the investment platform was “aware of the fund’s longstanding portfolio diversification and liquidity issues”.
Michael Green, director of RGL, said: “Adding thousands more claimants today to the RGL Group action represents another step closer to holding Hargreaves Lansdown to account for its conduct in relation to the WEIF.”
Investors are seeking to recoup their capital losses, but are also claiming damages for the lost opportunity of investing in alternative investments that would have generated positive returns.
Last year, the administrator of the failed Woodford fund, Link Fund Solutions, agreed to pay £230m to help regulators to compensate more than 300,000 customers. That redress scheme was approved by a high court judge in February, and the first payments, totalling £185.7m, were made to customers in March.
Investors have already had capital representing 67p in the pound returned to them via distributions since the fund’s collapse in June 2019, and the redress scheme is offering a further 10p in the pound.
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Link was responsible for monitoring and supervising the investments executed by Woodford before the fund failed. It was found to have made “critical mistakes and errors” after an investigation by the Financial Conduct Authority, particularly in ensuring it was able to easily repay customers who might want to withdraw their investments.
Woodford’s equity fund was worth more than £10bn at its peak but suffered from several poorly performing investments in companies including the estate agent Purplebricks, the finance firm Burford Capital and the doorstep lender Provident Financial.
Hargreaves Lansdown did not respond immediately to a request for comment. It previously rejected all the claims made by RGL when it filed for the first set of claimants in 2022 “for lack of a substantive basis of claim”.