When oversight breaks
01 Oct 2025
The collapse of Neil Woodford’s flagship fund was not just about poor stock picks — it exposed weaknesses across the fund industry’s checks and balances. From the ACD model to regulatory oversight, institutional investors were left questioning whether governance structures truly protect them
Image: sergio/stock.adobe.com
A structure built on checks and balances
When the Woodford Equity Income Fund (WEIF) launched in 2014, the fund industry was quick to assume that governance would be watertight. The model looked familiar and tested: Link Fund Solutions as Authorised Corporate Director (ACD), Northern Trust as depositary, and Woodford Investment Management (WIM) as fund manager. Together, these layers were supposed to guarantee investor protection through independence and oversight.
By 2016, the strategy appeared to be working, with assets surpassing £10 billion. But as history has shown, growth can mask risk. Behind the numbers, the governance structures that should have provided independent challenge to the fund manager were quietly eroding.
When red flags went unchallenged
By 2017, WEIF’s growing exposure to unlisted and illiquid companies was raising eyebrows in the market. Critics argued that WIM lacked sufficient internal challenge. ShareSoc’s director Mark Northway points to the absence of a properly empowered investment committee as “a key governance failure” with too much deference given to the star manager.
WIM disputes this characterisation, insisting that liquidity governance was the responsibility of the ACD. In their view, the fund’s investment committee existed, but its remit was not to override investment judgement. Liquidity was monitored through Link’s framework, with compliance and risk heads at WIM ensuring adherence. Portfolio construction, they argue, was rightly Neil Woodford’s domain.
At the same time, the regulator was becoming aware of the scale of illiquid exposure. The Financial Conduct Authority (FCA) documents later confirmed that by 2018, the fund had breached Undertakings for Collective Investment in Transferable Securities (UCITS) limits, with around a quarter of holdings taking six months or longer to liquidate. Yet despite media scrutiny and internal reporting, no party in the chain — manager, ACD, depositary or regulator — took decisive action.
Suspension and its fallout
The turning point came in May 2019, when Kent County Council, one of the UK’s largest local authority pension schemes, sought to redeem £263 million. That single request was enough to trigger a liquidity crunch that the UCITS structure could not withstand.
On 3 June 2019, Link and Northern Trust moved to suspend the fund, freezing £3.7 billion in assets. The suspension was framed as a protective measure, but for institutional investors it meant capital locked up indefinitely.
Neil Woodford has always maintained that the decision was unnecessary. He argues that Link, as ACD, controlled the prospectus and liquidity rules, and that stress tests had been run and shared with both the ACD and the regulator. “At no point did Link suggest suspension would be the outcome,” he has said, adding that WIM was given just 15 minutes’ notice.
From WIM’s perspective, the episode highlighted a structural mismatch: placing such a large institutional allocation into a retail UCITS fund created liquidity pressures that alternative structures might have avoided. The firm insists that tools such as in-specie transfers or dilution levies could have managed Kent’s redemption without resorting to suspension.
A battle over responsibility
The fallout was swift. In October 2019, Link confirmed the fund would be wound up, removing WIM as manager. BlackRock and PJT Partners were appointed to liquidate the assets, many of which were sold at significant discounts. Ombu, a portfolio once valued at £150 million, went for £30 million. By early 2020, £2.55 billion had been distributed, but nearly half a billion pounds remained trapped.
Years later, the FCA’s investigation concluded with fines for both WIM and Neil Woodford personally, alongside a ban on managing retail funds. The regulator’s assessment was damning: unreasonable investment decisions, inadequate oversight of liquidity, and what it called a “defective understanding” of senior manager responsibilities.
WIM rejects this interpretation, maintaining that liquidity oversight was set by the ACD and accepted by the FCA.
To them, Woodford’s role was to manage within that framework, not to challenge it. Others, however, see this as a convenient narrowing of responsibility. As Northway puts it: “Investors were badly let down throughout the chain of responsibility — by their fund manager, by the ACD and by the FCA.”
Lessons for the fund industry
The question now is whether the collapse has driven real reform. For many, the answer is no. Rachael Healey, partner at RPC, notes that while the ACD is responsible for liquidity oversight, the way it models that risk is largely discretionary.
In Woodford’s case, Link assumed a 100 per cent participation rate in its liquidity metrics — a methodology the FCA later challenged as unjustifiably optimistic.
Yet despite this, the FCA has indicated it does not plan to overhaul the regime, and with political pressure leaning toward deregulation, substantive change looks unlikely.
Healey suggests more transparency could help: making the assumptions behind ACD models readily available to investors and perhaps even rotating ACDs to reduce complacency and foster independence.
Others point to differences in international standards. Cédric Cajet, investment management strategy director at NeoXam, argues that while the saga has put a spotlight on governance, the UK’s ACD model is less prescriptive than EU UCITS rules, which mandate stricter liquidity and diversification requirements. “UK oversight provides a clear accountability framework, but it has limits, particularly when funds invest in illiquid assets,” he says.
For Northway, the bigger issue is trust. He believes the FCA’s redress scheme has fallen short of addressing the true scale of investor losses, leaving both retail and institutional participants disillusioned. “The FCA has placed harmed investors last in the queue. Again, that’s simply not good enough,” he concludes.
Closing thoughts
The Woodford case is a reminder that even in a highly regulated market, structures designed to protect investors can fail if assumptions go unchallenged and oversight bodies defer responsibility.
For asset servicers and institutional allocators, the lesson is clear: effective governance cannot rest on frameworks alone.
It requires active challenge, transparent reporting, and genuine independence — or else the next failure may follow the same script.
Timeline
2014: Launch of Woodford Equity Income Fund (UCITS), managed by Woodford Investment Management (WIM), with Link Fund Solutions as ACD and Northern Trust as depositary.
2017: Fund reaches peak AUM of over £10 billion; exposure to illiquid holdings begins to raise governance concerns.
2018: FCA correspondence confirms breaches of UCITS limits on illiquid assets, with up to 25% of the portfolio requiring six months or more to liquidate.
3 June 2019: Kent County Council’s £263m redemption request triggers liquidity crisis; Link and Northern Trust suspend the fund, freezing £3.7bn of assets.
October 2019: Link announces the fund will be wound up; WIM removed as fund manager; BlackRock and PJT Partners appointed to liquidate assets.
2020: Asset sales at steep discounts: Ombu sold for £30m (once valued at £150m). £2.55bn returned to investors; nearly £450m remains trapped.
2022: FCA signals potential £306m redress linked to Link Fund Solutions during Dye & Durham takeover process.
August 2025: FCA concludes investigation: fines of £40m for WIM and £5.89m for Neil Woodford; Woodford banned from managing retail funds.
When the Woodford Equity Income Fund (WEIF) launched in 2014, the fund industry was quick to assume that governance would be watertight. The model looked familiar and tested: Link Fund Solutions as Authorised Corporate Director (ACD), Northern Trust as depositary, and Woodford Investment Management (WIM) as fund manager. Together, these layers were supposed to guarantee investor protection through independence and oversight.
By 2016, the strategy appeared to be working, with assets surpassing £10 billion. But as history has shown, growth can mask risk. Behind the numbers, the governance structures that should have provided independent challenge to the fund manager were quietly eroding.
When red flags went unchallenged
By 2017, WEIF’s growing exposure to unlisted and illiquid companies was raising eyebrows in the market. Critics argued that WIM lacked sufficient internal challenge. ShareSoc’s director Mark Northway points to the absence of a properly empowered investment committee as “a key governance failure” with too much deference given to the star manager.
WIM disputes this characterisation, insisting that liquidity governance was the responsibility of the ACD. In their view, the fund’s investment committee existed, but its remit was not to override investment judgement. Liquidity was monitored through Link’s framework, with compliance and risk heads at WIM ensuring adherence. Portfolio construction, they argue, was rightly Neil Woodford’s domain.
At the same time, the regulator was becoming aware of the scale of illiquid exposure. The Financial Conduct Authority (FCA) documents later confirmed that by 2018, the fund had breached Undertakings for Collective Investment in Transferable Securities (UCITS) limits, with around a quarter of holdings taking six months or longer to liquidate. Yet despite media scrutiny and internal reporting, no party in the chain — manager, ACD, depositary or regulator — took decisive action.
Suspension and its fallout
The turning point came in May 2019, when Kent County Council, one of the UK’s largest local authority pension schemes, sought to redeem £263 million. That single request was enough to trigger a liquidity crunch that the UCITS structure could not withstand.
On 3 June 2019, Link and Northern Trust moved to suspend the fund, freezing £3.7 billion in assets. The suspension was framed as a protective measure, but for institutional investors it meant capital locked up indefinitely.
Neil Woodford has always maintained that the decision was unnecessary. He argues that Link, as ACD, controlled the prospectus and liquidity rules, and that stress tests had been run and shared with both the ACD and the regulator. “At no point did Link suggest suspension would be the outcome,” he has said, adding that WIM was given just 15 minutes’ notice.
From WIM’s perspective, the episode highlighted a structural mismatch: placing such a large institutional allocation into a retail UCITS fund created liquidity pressures that alternative structures might have avoided. The firm insists that tools such as in-specie transfers or dilution levies could have managed Kent’s redemption without resorting to suspension.
A battle over responsibility
The fallout was swift. In October 2019, Link confirmed the fund would be wound up, removing WIM as manager. BlackRock and PJT Partners were appointed to liquidate the assets, many of which were sold at significant discounts. Ombu, a portfolio once valued at £150 million, went for £30 million. By early 2020, £2.55 billion had been distributed, but nearly half a billion pounds remained trapped.
Years later, the FCA’s investigation concluded with fines for both WIM and Neil Woodford personally, alongside a ban on managing retail funds. The regulator’s assessment was damning: unreasonable investment decisions, inadequate oversight of liquidity, and what it called a “defective understanding” of senior manager responsibilities.
WIM rejects this interpretation, maintaining that liquidity oversight was set by the ACD and accepted by the FCA.
To them, Woodford’s role was to manage within that framework, not to challenge it. Others, however, see this as a convenient narrowing of responsibility. As Northway puts it: “Investors were badly let down throughout the chain of responsibility — by their fund manager, by the ACD and by the FCA.”
Lessons for the fund industry
The question now is whether the collapse has driven real reform. For many, the answer is no. Rachael Healey, partner at RPC, notes that while the ACD is responsible for liquidity oversight, the way it models that risk is largely discretionary.
In Woodford’s case, Link assumed a 100 per cent participation rate in its liquidity metrics — a methodology the FCA later challenged as unjustifiably optimistic.
Yet despite this, the FCA has indicated it does not plan to overhaul the regime, and with political pressure leaning toward deregulation, substantive change looks unlikely.
Healey suggests more transparency could help: making the assumptions behind ACD models readily available to investors and perhaps even rotating ACDs to reduce complacency and foster independence.
Others point to differences in international standards. Cédric Cajet, investment management strategy director at NeoXam, argues that while the saga has put a spotlight on governance, the UK’s ACD model is less prescriptive than EU UCITS rules, which mandate stricter liquidity and diversification requirements. “UK oversight provides a clear accountability framework, but it has limits, particularly when funds invest in illiquid assets,” he says.
For Northway, the bigger issue is trust. He believes the FCA’s redress scheme has fallen short of addressing the true scale of investor losses, leaving both retail and institutional participants disillusioned. “The FCA has placed harmed investors last in the queue. Again, that’s simply not good enough,” he concludes.
Closing thoughts
The Woodford case is a reminder that even in a highly regulated market, structures designed to protect investors can fail if assumptions go unchallenged and oversight bodies defer responsibility.
For asset servicers and institutional allocators, the lesson is clear: effective governance cannot rest on frameworks alone.
It requires active challenge, transparent reporting, and genuine independence — or else the next failure may follow the same script.
Timeline
2014: Launch of Woodford Equity Income Fund (UCITS), managed by Woodford Investment Management (WIM), with Link Fund Solutions as ACD and Northern Trust as depositary.
2017: Fund reaches peak AUM of over £10 billion; exposure to illiquid holdings begins to raise governance concerns.
2018: FCA correspondence confirms breaches of UCITS limits on illiquid assets, with up to 25% of the portfolio requiring six months or more to liquidate.
3 June 2019: Kent County Council’s £263m redemption request triggers liquidity crisis; Link and Northern Trust suspend the fund, freezing £3.7bn of assets.
October 2019: Link announces the fund will be wound up; WIM removed as fund manager; BlackRock and PJT Partners appointed to liquidate assets.
2020: Asset sales at steep discounts: Ombu sold for £30m (once valued at £150m). £2.55bn returned to investors; nearly £450m remains trapped.
2022: FCA signals potential £306m redress linked to Link Fund Solutions during Dye & Durham takeover process.
August 2025: FCA concludes investigation: fines of £40m for WIM and £5.89m for Neil Woodford; Woodford banned from managing retail funds.
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