This is the fourth piece in a series examining disputes in financial services and banking, and arguing for greater uptake of mediation as a means of resolution. I’ve looked at the case for the sector overall, and then examined specific product areas. Previous pieces looked at the derivatives and lending markets, and their characteristics which in turn drive the types of dispute which can arise. In this piece I turn to asset management, which I will contend has the unusual capacity to turn one problem - or dispute - into many.
That initial problem can come in a variety of shapes and forms: an investment becomes difficult to value. A fund experiences unexpected redemptions. Questions arise about the conduct of a portfolio manager. An underlying counterparty fails. What begins as a single investment or management problem can then spread quickly through the asset management “architecture” - pitting investors against the fund or the fund against its manager, and leading to claims involving directors, administrators or depositaries, regulatory investigations, professional indemnity insurers and, ultimately, litigation against third parties thought to bear some responsibility for the loss.
In other words, whilst the underlying economic loss may be singular, the resulting disputes may be multiple.
This fragmentation is a key reason why disputes arising from asset management deserve particular consideration for mediation. Litigation is well equipped to determine legal rights and liabilities. It is, however, less naturally equipped to address an economic problem involving several parties, uncertain asset values, competing classes of investor and a limited pool of resources from which recoveries might ultimately be made.
The advantage of mediation in such cases is therefore not simply that it offers another way to settle a claim. It can change the focus of analysis: from the individual legal claim to the economic problem that generated a series of claims.
The collapse of the Woodford Equity Income Fund provides a striking example of how such a problem can arise, and how its eventual resolution can extend beyond conventional adjudication.
Dealing in the LF Woodford Equity Income Fund was suspended on 3 June 2019. Increasing redemption requests meant that such requests could no longer immediately be met. The Financial Conduct Authority (FCA) subsequently concluded that Link Fund Solutions, the fund's authorised corporate director, had failed adequately to manage its liquidity and to oversee Woodford Investment Management.[1]
But the problem was no longer simply whether the fund had been properly managed.
Those investors who had redeemed earlier had received their money. Those who had remained in the fund when it was suspended were exposed to the subsequent process of selling its investments, including relatively illiquid holdings. In consequence, the interests of different investors had diverged. Questions of portfolio management, liquidity management and regulatory responsibility became intertwined with the practical question of how the remaining losses should be allocated and recovered.
Subsequent to negotiations between the FCA, Link Fund Solutions and its parent, a court-approved scheme of arrangement was established providing up to £230 million of redress to affected investors. Link's parent agreed voluntarily to contribute up to £60 million, money which the FCA noted would not otherwise have been available through separate legal or regulatory proceedings.[2]
The FCA's assessment was pragmatic. Continuing enforcement could take years. Even were it successful, the assets ultimately available to satisfy a claim might produce less for investors. The scheme, in its view, offered the quickest and best prospect of maximising recoveries.[3]
The Woodford scheme was not a mediation. But its economics (and process) are recognisable to any mediator.
The ultimate question was no longer simply: who was legally responsible?
Rather, the scheme asked: given what has happened, what resources are available, who can contribute, and how can those resources best be used to compensate those who have suffered loss?
The distinction between those two questions matters greatly.
From the outside an investment fund may appear to involve a relatively simple relationship between an investor and an investment manager. In practice, however, responsibility is distributed, and the interests of different investor groups may themselves diverge.
The participants and/or entities in any given fund structure may include the fund itself, its manager, an authorised corporate director or board, administrator, depositary or custodian, investment advisers, auditors, distributors and insurers. In turn, at one step removed sit the issuers and counterparties whose assets or obligations comprise the portfolio.
Poor investment performance need not of course lead to a dispute. Investment involves risk, and poor performance is not evidence of wrongdoing.
The position becomes more difficult where performance interacts with questions of valuation, liquidity, mandate compliance, conflicts of interest, disclosure or due diligence. At that point, it may not even be clear which participant is responsible for the problem.
A decision to sell liquid assets rapidly to meet redemptions may protect departing investors while leaving those who remain with a less liquid and potentially riskier portfolio. Suspending redemptions protects the integrity of the portfolio but prevents investors from accessing their capital. A disputed valuation may determine not only the reported performance of a fund but the price at which one investor exits at the expense of those who remain.
The result is not simply a dispute between two parties. It is an interconnected economic problem.
Nor is the underlying structural tension new. The Arch cru funds suspended dealing in March 2009. The funds invested in assets including private equity and private finance, whose illiquidity and uncertain valuations complicated both meeting redemption requests and establishing what investors could recover. Open-ended property funds experienced suspensions following the Brexit referendum in 2016 and during the market disruption of 2020. The episodes were not identical: in 2020, material uncertainty over property valuations was an immediate reason for suspension. Together they illustrate the tension that can arise when investors are offered frequent liquidity against assets that cannot readily be sold or valued.[4]
The difficulties experienced by H2O Asset Management demonstrate the problem particularly clearly.
A number of H2O funds accumulated exposures to relatively illiquid securities associated with the German financier Lars Windhorst. The FCA subsequently identified serious shortcomings in H2O's due diligence and management of conflicts, as well as misleading information supplied to the regulator. In particular, it found failures to conduct proper due diligence on high-risk, hard-to-sell investments.[5]
When the affected funds were restructured in 2020, illiquid Tennor-related assets were placed into separate side-pocketed funds. Investors regained access to the liquid portions of their investments, while the problematic assets were earmarked for disposal in the side pockets.[6]
A side pocket may solve one problem while exposing another. Once an asset cannot readily be sold, what is it worth? Who should bear the cost of waiting for its eventual realisation? What fees should a manager receive for managing an asset from which investors cannot exit? Should an investor who wants liquidity accept a discount today or await an uncertain recovery tomorrow? Those questions are partly legal, but they are also questions of valuation and risk allocation.
The H2O regulatory settlement again went beyond a conventional damages payment. In 2024, following the FCA investigation, H2O agreed to make €250 million available to affected investors. It also waived rights to fees and investments totalling €320 million. Taking account of that outcome and the earlier AMF penalty, the FCA did not impose the substantial financial penalty it otherwise would have sought.[7]
Cash, fee waivers, investment rights and regulatory consequences had effectively become components of a wider economic resolution.
The recovery process continued. In June 2026, H2O announced that disposal of the side-pocket assets was complete and that a final €135.7 million repayment and liquidation were scheduled for July. The regulatory settlement and the subsequent asset realisations were distinct elements of that recovery process.[8]
That flexibility is highly relevant to mediation. Where the dispute concerns an illiquid asset, the parties need not agree upon a single answer to the question “what is it worth today?” They might instead agree a mechanism: an independent valuation, staged realisation, contingent payments, transfer of the asset, sharing of future proceeds, fee reductions or different treatment of different investor groups.
In other words, an element of uncertainty (or dispute) can be resolved through a process of negotiation.
Asset management disputes do not all begin with an investment loss, however.
Following an internal investigation, in July 2018, GAM suspended investment director Tim Haywood. At the time, GAM expressly stated that the investigation had not raised concerns about his honesty and that it had not identified material client detriment. Nevertheless, the reaction of investors was immediate: the Absolute Return Bond Funds managed by Haywood experienced substantial redemption requests, and by 31 July 2018 dealing had been suspended across funds representing CHF7.3 billion of assets.[9]
GAM stated that the funds had sufficient liquidity to meet the redemption requests, but that doing so would disproportionately alter their portfolio composition and potentially prejudice remaining investors. The funds were subsequently liquidated. One year on in July 2019, GAM reported an expected asset-weighted average return of 100.5 per cent of NAV relative to the valuations at the start of liquidation in September 2018. That was not, however, a measure of recovery against investors’ original purchase prices.[10]
In March 2022, nearly four years later, the FCA fined GAM International Management £9,103,523 and Haywood £230,037 for failures relating to due care and the management of conflicts of interest. The findings concerned three transactions, two linked to Greensill Capital. The loss of investor confidence in July 2018 therefore preceded, by nearly four years, the FCA's eventual published findings. Those findings should not be treated as proof that misconduct caused the 2018 redemptions.[11]
GAM therefore illustrates a different feature of asset management disputes. The original issue need not itself cause a major financial loss. A concern about governance, conduct or reputation can cause investors to withdraw capital; those withdrawals create a liquidity problem; the liquidity problem causes suspension; and suspension itself further damages confidence.
In other words, the dispute has itself become a part of the loss.
Mediation cannot manufacture liquidity, nor can confidentiality make legitimate regulatory concerns disappear. But early intervention can sometimes address the surrounding issues before positions become irreversible: communications with key investors, governance changes, management succession, independent oversight or agreed arrangements for an orderly exit.
Asset management is an industry dependent upon confidence, and therefore time can matter as much as legal merit.
Woodford, H2O and GAM illustrate different ways in which an asset management problem can develop beyond its original cause. Unfortunately, not every failure produces a coordinated economic resolution.
The collapse of the Cayman Islands-based Weavering Macro Fixed Income Fund provides an extreme example. Magnus Peterson used worthless interest-rate swaps with a related entity to inflate NAV and disguise substantial trading losses. He was later convicted of offences including fraud and sentenced to 13 years in prison.[12]
The criminal prosecution was a matter for the public authorities. But it was only the beginning of the legal consequences. The liquidators pursued the non-executive directors over failures of oversight. The first-instance US$111 million judgment was set aside on appeal in 2015, in litigation concerning duties and the protection afforded by the fund’s exemption clause. Separately, the liquidators pursued recovery of redemption payments made before the collapse. That strand reached the Privy Council in 2019, more than ten years after the fraud was uncovered.[13]
Different proceedings asked different legal questions. Had the directors fulfilled their duties, and were they protected from liability by the fund’s articles? Could redemption payments be recovered as preferences? Each question was capable of judicial determination. Collectively, however, they arose from the same economic failure.
The pattern is familiar in major fund failures. A liquidator may pursue the manager, directors, administrator or auditor. Those parties may look to insurers. Investors may bring their own claims. Meanwhile, claims may exist against the issuers, counterparties or other third parties responsible for the underlying investments.
The business built by and associated with Lex Greensill, already cited in the GAM example above, provides a larger and more recent illustration of precisely this pattern. Credit Suisse's supply chain finance funds were built around Greensill Capital, and when the four funds were closed in March 2021, investors had approximately US$10 billion invested in them. FINMA subsequently found serious deficiencies in Credit Suisse's risk management and organisational structures, concluding - inter alia - that Credit Suisse's asset management business had insufficient knowledge and control over the claims underlying the funds, relying heavily upon Greensill itself for their selection and for insurance arrangements.[14]
The recovery exercise extended beyond Credit Suisse and Greensill to underlying debtors, insurers and potential claims against third parties. The English litigation involving a Credit Suisse fund, its note trustee, SoftBank entities and Greensill Limited over the Katerra financing structure offers a concrete example. In October 2025, the High Court dismissed the claim against the SoftBank defendants, despite finding that the relevant Greensill transactions were at an undervalue and had the statutory purpose of prejudicing creditors. Individual causes of action became pieces of a much larger recovery strategy.[15]
This is where the contrast between litigation and mediation becomes particularly important - the distinct questions that we identified earlier.
Litigation typically begins with a defined legal question: does A have a legally enforceable claim against B? A complex mediation can begin somewhere else: what is the total economic problem, which parties and resources are relevant to solving it, and is there a package which produces a better outcome than pursuing each claim separately?
The two processes are not substitutes in every case. A defendant confident that a claim is unfounded may quite rationally prefer a judgment. Regulatory enforcement raises public-interest considerations that private parties cannot compromise. Fraud, as Weavering shows, may require investigation and adjudication in its own right.
But there is no reason why every strand of a multi-party asset management failure must therefore travel separately through the courts. Once sufficient facts are known for parties to assess their legal and commercial positions, questions of allocation and recovery may be precisely the kind that a negotiated process is equipped to address.
The case for mediation in asset management disputes (in common with many other categories) is sometimes expressed primarily in terms of the benefits of confidentiality. Confidentiality certainly matters in an industry built upon reputation and investor confidence, but it is not the strongest argument.
I contend that the more important advantage is that of flexibility of process and remedy.
First of all, a mediation can bring together parties who would otherwise appear in different proceedings. It can accommodate competing claims against a finite pool of assets. It can allow technical issues such as valuation to be referred to an agreed independent expert without requiring every other issue to await that determination.
Most importantly, the flexible nature of mediation affords that the settlement need not consist solely of a payment by one party to another.
A mediated resolution may comprise a host of elements: cash compensation; fee waivers or rebates; transfer of assets; participation in future realisation proceeds; staged redemptions; revised valuation mechanisms; contributions from insurers or parent companies; changes in governance or oversight; replacement of service providers; assignment or sharing of third-party claims; and an agreed communications strategy.
Some of those outcomes may be achievable through litigation eventually. Few are natural products of a judgment.
Additionally, mediation also allows the parties to price litigation risk rather than eliminate it. A manager need not concede that its valuation was wrong. An administrator need not accept that it breached its duties. An investor need not abandon its claim. They need only decide that a particular allocation of the economic consequences is preferable to the range of outcomes available through continued litigation. Assess risk and buy certainty, as the saying goes.
Once again, that distinction is particularly important where valuation itself is uncertain.
There is an understandable tendency, after a fund failure, to look backwards. What went wrong? Who knew? Who should have acted? Who bears legal responsibility?
Those questions matter. Regulators must investigate misconduct and courts must remain available to determine contested rights.
The interest of investors is typically more prosaic: how much of my money can I recover, and when do I get paid?
Woodford and H2O are instructive because their eventual resolutions addressed that question directly. Neither was a mediation. Both nevertheless demonstrate the value of moving beyond a binary determination of liability towards a package constructed around the resources actually available.
That is the opportunity mediation offers in appropriate asset management disputes.
A single loss can involve an investment manager, fund board, administrator, depositary, auditor, insurer, counterparty and several groups of investors whose interests may not coincide. If each relationship is treated as a separate dispute, years of litigation can follow while value is consumed in establishing how responsibility should ultimately be divided.
The alternative is absolutely not to disregard legal rights. Those rights establish the bargaining positions with which the parties enter the room. But mediation permits a different analytic lens: instead of asking only how each individual claim should be adjudicated, the parties can ask whether the economic problem that produced those claims can itself be resolved. Legal rights are the starting point rather than the destination.
Courts resolve claims, and in asset management disputes, claims have a habit of proliferating. In the right asset management dispute, mediation can resolve the economic problem from which those claims arose.
[1]FCA, Final Notice to Link Fund Solutions Limited, 11 April 2024; see also FCA, “FCA sets out findings against Link Fund Solutions”, 11 April 2024. https://www.fca.org.uk/publication/final-notices/link-fund-solutions-limited-2024.pdf
[2]FCA, “FCA sets out findings against Link Fund Solutions”, 11 April 2024 (scheme approved by the High Court in February 2024; up to £230m); FCA, “FCA announces plan to deliver significant redress to Woodford investors”, 19 April 2023 (parent contribution and recovery comparison). https://www.fca.org.uk/news/press-releases/fca-sets-out-findings-against-link-fund-solutions ; https://www.fca.org.uk/news/press-releases/fca-announces-plan-deliver-significant-redress-woodford-investors
[3]FCA, “FCA announces plan to deliver significant redress to Woodford investors”, 19 April 2023. The redress addressed losses arising from liquidity-management failures, rather than all losses from investment performance. https://www.fca.org.uk/news/press-releases/fca-announces-plan-deliver-significant-redress-woodford-investors
[4]FCA Handbook, CONRED 2 Annex 15, paragraph 2-4 and 10(e)-(f) (Arch cru suspension); FCA, “Review of property funds and liquidity risks”, 20 July 2017; FCA, “Statement on property fund suspensions”, 18 March 2020; FCA, CP20/15, August 2020, paragraphs 1.1-1.3. https://handbook.fca.org.uk/handbook/conred2/conred2s25 ; https://www.fca.org.uk/news/statements/property-fund-suspensions ; https://www.fca.org.uk/publication/consultation/cp20-15.pdf
[5]FCA, “H2O will pay €250 million to investors following FCA investigation”, 7 August 2024, and accompanying Final Notice. https://www.fca.org.uk/news/press-releases/h2o-will-pay-250-million-euro-investors-following-fca-investigation
[6]H2O Asset Management, “Communication H2O - 09/10/2020”, 9 October 2020. https://www.h2o-am.com/communication-h2o-09-10-2020-2/
[7]FCA, “H2O will pay €250 million to investors following FCA investigation”, 7 August 2024, including notes to editors, paragraph 3. https://www.fca.org.uk/news/press-releases/h2o-will-pay-250-million-euro-investors-following-fca-investigation
[8]H2O Asset Management, “H2O AM to complete the liquidation of the side-pocketed funds with a final repayment of €135.7 million”, 29 June 2026. This is the manager’s announcement of the scheduled liquidation, rather than independent confirmation of completion. https://www.h2o-am.com/h2o-am-to-complete-the-liquidation-of-the-side-pocketed-funds-with-a-final-repayment-of-e135-7-million/
[9]GAM, “GAM Holding AG: suspension of an investment director”, 30 July 2018 (client detriment remained under review); GAM, “GAM fund boards suspend dealing in unconstrained/absolute return bond funds”, 1 August 2018. https://www.gam.com/en/news-articles/press-releases/corporate/gam-holding-ag-suspension-of-an-investment-director ; https://cdn.gam.com/en/news-articles/press-releases/corporate/gam-fund-boards-suspend-dealing-in-unconstrained-absolute-return-bond-funds
[10]GAM, suspension announcement, 1 August 2018; GAM, “Update on ARBF liquidation”, 15 July 2019, including footnote *: fund outcomes ranged from 99.7% to 101.5%, with figures subject to slight changes. https://www.gam.com/en/news-articles/press-releases/corporate/update-on-arbf-liquidation
[11]FCA, Final Notices to GAM International Management Limited and Timothy Haywood, 29 March 2022; FCA press release, 30 March 2022. The FCA did not find that Haywood made investment decisions because of the gifts and entertainment. https://www.fca.org.uk/publication/final-notices/gam-international-management-limited-2022.pdf ; https://www.fca.org.uk/publication/final-notices/timothy-haywood-2022.pdf
[12]Skandinaviska Enskilda Banken AB (Publ) v Conway and another [2019] UKPC 36, paragraphs 2-5 and 11. https://www.jcpc.uk/cases/jcpc-2017-0022
[13]Peterson and Ekstrom v Weavering Macro Fixed Income Fund Ltd [2015] (1) CILR 45, Cayman Court of Appeal, 12 February 2015, paragraphs 1-4 and 110-123; judgment: https://fountaincourt.uk/wp-content/uploads/Weavering-CICA-judgment-12-2-2015.pdf . Separately, SEB v Conway [2019] UKPC 36, paragraphs 2 and 122: recovery from SEB as registered shareholder acting as nominee. https://www.jcpc.uk/cases/jcpc-2017-0022
[14]FINMA, “FINMA concludes ‘Greensill’ proceedings against Credit Suisse”, 28 February 2023, particularly “Structure of the funds” and “Deficiencies in risk management and organisational structures”. https://www.finma.ch/en/news/2023/02/20230228-mm-greensill/
[15]Credit Suisse Virtuoso SICAV-SIF and another v SoftBank Group Corp and others [2025] EWHC 2631 (Ch), 15 October 2025, paragraphs 676, 710, 757, 810-814 and 825; official judgment listing and court press summary. https://www.judiciary.uk/judgments/credit-suisse-v-softbank/ ; https://www.judiciary.uk/wp-content/uploads/2025/10/Credit-Suisse-v-SoftBank-Press-Summary-15.10.25.pdf