Waystone Group set to acquire LFS as FCA announce pay redress over Woodford failures
21 April 2023 UK
Image: Worawut
Asset servicing provider The Waystone Group is set to acquire the Irish and UK businesses of Link Fund Solutions (LFS), a division of Link Group, subject to regulatory approval.
As part of the acquisition, Waystone will work with investment managers and fund sponsors to build and support fund structures and to protect the interest of fund investors.
The acquisition, which follows Waystone’s acquisition of T. Bailey Fund Services in 2022, is part of an effort to further strengthen Waystone’s presence in the UK.
It will also broaden Waystone’s UK offering to include transfer agency and alternative administration.
In addition, it further expands the Group’s administration offering following its acquisition of Centaur Fund Administration in January 2023, together with a further strengthening of the Group’s Irish Management Company (ManCo) offering — this follows the acquisition of KB Associates in 2022.
As part of the LFS acquisition, 600 staff will join Waystone. The mandate also includes the opening of the Group’s first India office where it will welcome 150 employees.
Karl Midl, CEO of LFS, comments: “We are delighted to be joining Waystone who are well known as a leading European fund services provider in our industry. We look forward to working with Waystone to continue to build the confidence of asset managers, asset owners and investors in the fund market.”
Nancy Lewis, executive chairman of Waystone, says: "The LFS acquisition further underscores Waystone's strategic ambition of becoming the global leader in asset servicing. With our dual strategy of external and organic growth, driven by strong leadership and senior management, we will continue to expand our reach and deepen the quality of services we offer worldwide.”
In September 2022, The UK Financial Conduct Authority (FCA) provided an update on its investigation of the liquidation of the Woodford Equity Income Fund (WEIF), in which it said, by association, LFS could be required to pay up to £306 million in penalties.
The update followed announcements made by the wider Link Group in which the company affirmed its potential acquirer, software company Dye and Durham (D&D).
D&D’s proposed takeover of Link Group involved the acquisition of seven firms authorised by the FCA. One of these firms is LFS, which managed the WEIF.
On 19 April it was announced that LFS has agreed to provide a significant redress payment to investors in the WEIF of up to approximately £235 million.
The redress is to cover losses to over 300,000 investors in the WEIF, as a result of failures by LFS. As the authorised corporate director (ACD) of the WEIF, LFS is responsible for managing the liquidity of the fund.
The redress agreement is subject to completion of a sale of the LFS business which will generate up to approximately £140 million in sale proceeds.
The FCA says it has received appropriate information from Waystone and assurances from LFS and Link Group that fair value of these assets has been represented.
The FCA’s investigation found that, as ACD, LFS had responsibility for ensuring the WEIF operated with appropriate liquidity risk management and controls, and that “all investors in the fund were treated fairly.”
The FCA considers LFS made critical mistakes and errors in managing WEIF’s liquidity and the fund failed to have a “reasonable and appropriate” liquidity profile from September 2018.
By 1 November 2018, LFS’s failure to have properly measured the liquidity of the WEIF meant that investors leaving the fund from that point onwards “benefited disproportionately from access to the most liquid assets in the fund which were sold,” the FCA says.
It considers that those investors who continued to hold investments in the WEIF, at the time of its suspension, were treated unfairly because this left them with a “disproportionate share of the remaining assets which were more illiquid.”
There are other parties under the investigation of the FCA in relation to the circumstances that led to the suspension of the WEIF.
The association has affirmed that these investigations are set to continue and it will consider any further failings which may have negatively impacted investors.
Therese Chambers, executive director of enforcement and market oversight at the FCA, comments: “LFS’s actions appear to have caused significant losses for those investors who remained in the fund when it was suspended.
“We believe the proposed scheme offers investors the best chance to obtain a better outcome than might be achieved by any other means and it is in the investors’ interests that they be given the chance to consider it.”
As part of the acquisition, Waystone will work with investment managers and fund sponsors to build and support fund structures and to protect the interest of fund investors.
The acquisition, which follows Waystone’s acquisition of T. Bailey Fund Services in 2022, is part of an effort to further strengthen Waystone’s presence in the UK.
It will also broaden Waystone’s UK offering to include transfer agency and alternative administration.
In addition, it further expands the Group’s administration offering following its acquisition of Centaur Fund Administration in January 2023, together with a further strengthening of the Group’s Irish Management Company (ManCo) offering — this follows the acquisition of KB Associates in 2022.
As part of the LFS acquisition, 600 staff will join Waystone. The mandate also includes the opening of the Group’s first India office where it will welcome 150 employees.
Karl Midl, CEO of LFS, comments: “We are delighted to be joining Waystone who are well known as a leading European fund services provider in our industry. We look forward to working with Waystone to continue to build the confidence of asset managers, asset owners and investors in the fund market.”
Nancy Lewis, executive chairman of Waystone, says: "The LFS acquisition further underscores Waystone's strategic ambition of becoming the global leader in asset servicing. With our dual strategy of external and organic growth, driven by strong leadership and senior management, we will continue to expand our reach and deepen the quality of services we offer worldwide.”
In September 2022, The UK Financial Conduct Authority (FCA) provided an update on its investigation of the liquidation of the Woodford Equity Income Fund (WEIF), in which it said, by association, LFS could be required to pay up to £306 million in penalties.
The update followed announcements made by the wider Link Group in which the company affirmed its potential acquirer, software company Dye and Durham (D&D).
D&D’s proposed takeover of Link Group involved the acquisition of seven firms authorised by the FCA. One of these firms is LFS, which managed the WEIF.
On 19 April it was announced that LFS has agreed to provide a significant redress payment to investors in the WEIF of up to approximately £235 million.
The redress is to cover losses to over 300,000 investors in the WEIF, as a result of failures by LFS. As the authorised corporate director (ACD) of the WEIF, LFS is responsible for managing the liquidity of the fund.
The redress agreement is subject to completion of a sale of the LFS business which will generate up to approximately £140 million in sale proceeds.
The FCA says it has received appropriate information from Waystone and assurances from LFS and Link Group that fair value of these assets has been represented.
The FCA’s investigation found that, as ACD, LFS had responsibility for ensuring the WEIF operated with appropriate liquidity risk management and controls, and that “all investors in the fund were treated fairly.”
The FCA considers LFS made critical mistakes and errors in managing WEIF’s liquidity and the fund failed to have a “reasonable and appropriate” liquidity profile from September 2018.
By 1 November 2018, LFS’s failure to have properly measured the liquidity of the WEIF meant that investors leaving the fund from that point onwards “benefited disproportionately from access to the most liquid assets in the fund which were sold,” the FCA says.
It considers that those investors who continued to hold investments in the WEIF, at the time of its suspension, were treated unfairly because this left them with a “disproportionate share of the remaining assets which were more illiquid.”
There are other parties under the investigation of the FCA in relation to the circumstances that led to the suspension of the WEIF.
The association has affirmed that these investigations are set to continue and it will consider any further failings which may have negatively impacted investors.
Therese Chambers, executive director of enforcement and market oversight at the FCA, comments: “LFS’s actions appear to have caused significant losses for those investors who remained in the fund when it was suspended.
“We believe the proposed scheme offers investors the best chance to obtain a better outcome than might be achieved by any other means and it is in the investors’ interests that they be given the chance to consider it.”
NO FEE, NO RISK
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Assegt Servicing Times
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Assegt Servicing Times
