The sequence
The Fund was suspended in June 2019, trapping investors in a fund whose illiquid holdings could not be sold quickly enough to meet redemptions. The FCA opened an investigation into the circumstances leading up to the suspension and into Link Fund Solutions’ role as authorised corporate director of the Fund. In April 2023 the FCA announced a conditional settlement of that investigation.
What the settlement provided
Under the settlement, Link Fund Solutions agreed to pay all of its assets to investors in the Fund through a scheme of arrangement. Link Group, its ultimate parent, agreed to contribute up to £60m to the settlement fund and a further £2.5m to Link Fund Solutions towards the scheme’s costs — money the FCA stated would not otherwise have been available to investors. The FCA stated that it considered the scheme the quickest and best chance of a better outcome than any other means.
The timetable and the amounts
Investors voted overwhelmingly to approve the scheme in December 2023. The High Court handed down judgment approving it on 9 February 2024, and the scheme became fully effective on 5 March 2024. Link Fund Solutions expected to pay a significant distribution of between £183.5m and £200m in the first quarter of 2024, with possible further tranches depending on what could be released from the reserve. Scheme creditors did not need to take any action to receive payments.
Who was excluded, and why
The scheme does not include any investor who redeemed all of their investment in the Fund before the suspension date. The FCA’s explanation is that the redress reflects its assessment that those who held investments when the Fund was suspended lost out compared with those who redeemed before it. If you are in that group, the scheme is not open to you.
The FCA’s findings, and its calculation
The FCA’s proposed findings centred on Link Fund Solutions’ failure to comply with two of its Principles for Businesses. The FCA stated that the restitution reflects its position on that failure and is not intended to reflect losses caused by a deterioration in the performance of the underlying investments. Its calculation compared what investors received after suspension with what they would have received had the proceeds of asset sales from 1 November 2018 been shared equally between those who redeemed during the period and those still invested at suspension.
FSCS, and why it did not step in
The FCA’s page records that FSCS offers compensation up to £85,000 for protected claims, that not all investors would have been eligible, and that Link Fund Solutions was not considered by FSCS to be in default. It also records that if the scheme was approved, investors would have no recourse to FSCS in relation to claims released by the scheme. That is an important point of principle: where a scheme settles a matter, the scheme of last resort is usually closed off for the same loss.
What to do now
The scheme website holds the investor letters, the scheme documents and the payment history, and questions go to Link Fund Solutions or to the Investor Advocate appointed for the scheme. If you believe you should have been included and were not, that is a question about your own holding, and the scheme’s own contact routes are the place to raise it.