Neil Woodford’s speedy descent made Icarus look like a slouch. Many thought he would now be spending more time with his horses. He’s actually plotting a comeback.
Fallen stock-picker Neil Woodford is “seeking a new start” following the spectacular collapse of his investment empire this year, says The Daily Telegraph. The former star manager was reportedly in China just before Christmas meeting investors “to scope out interest” in a possible comeback there. The opening of a Chinese-backed fund “could give a new lease of life” to Woodford, 59, who was sacked from his £3.1bn flagship fund, Woodford Equity Income, in October and forced “to shut down his company” after a string of risky bets left hundreds of thousands of small investors facing massive losses. He is also understood to be sounding out investors in the Middle East.
Woodford, who’d continued charging his gated investors fees, didn’t want to quit – arguing that he couldn’t believe it was in “the long-term interests of the business”. That’s a measure of the “arrogance” of the man, says Ruth Sunderland in the Daily Mail. His self-belief remained “unshakeable” despite his “vertiginous fall”. When he started his flagship fund in 2014, he threw a launch party at Langan’s Brasserie in Mayfair, telling backers and fans that he wanted to “create a legacy” comparable with that of “the iconic 19th-century financier John Pierpont Morgan”, says the FT. “Erstwhile admirers now wonder whether the self-styled industry disrupter may have come to believe in his own propaganda a little too much.”
Woodford’s speedy descent from “bright star to black hole” reads like a classical fable. He makes Icarus look like a slouch, says The Observer. But then speed has always been part of the Woodford story. A frustrated fighter pilot, he stumbled into fund management almost by accident. Raised in Berkshire, the son of a postcard printer, Woodford, says the FT, “lamented” his father’s lack of ambition. After attending Maidenhead Grammar, his own career choice was the Royal Air Force, but he failed the pilot aptitude test. “My reaction speeds were just not fast enough,” he later recalled. Heading for Exeter University instead, he took a degree in economics and agricultural economics and arrived in the City in 1981 in the midst of a recession. “With little money in his pocket, he slept on his brother’s floor while he flitted through various jobs at the Reed Pension Fund, TSB and Eagle Star” before bagging a role at Henley-based Invesco Perpetual in 1988.
A man on a mission
When Woodford started out, he was given £14m to manage; by the time he left Invesco, he was running £24.1bn. His investment style was long-termist: he prided himself on ignoring the siren “noise” of the market. That led to some good calls. Woodford shunned the dotcom bubble – a move that nearly cost him his job – and dumped shares in banks long before the 2008 crisis hit. “With his rugby-player’s build and penchant for black sweaters and jeans”, Woodford “never looked much like the archetypal City fund manager”, says the FT. “Based in a dreary Oxfordshire industrial park, he might have passed as a dressed-down entrepreneur, or a fitness coach.” Yet for more than two decades, he delivered on his mission “to make Middle England rich” – attracting “a rock-star like following” from savers, financial advisers and, later, popular investment platforms. Within two weeks of launching his own fund in 2014, he’d pulled in £1.6bn – a British record.
“Domestic bliss came late in life for Woodford,” says the Daily Mail. In 2015, he married an amateur show-jumper who awoke in him “an unlikely passion for equestrianism” – he began competing himself at weekends. Many thought his downfall this year would see him spending more time with his horses. Apparently not.
What now for Woodford’s funds?
Discounting various “multi-asset” funds with holdings in Woodford vehicles, there were three main funds that suffered in the wake of the fund manager’s downfall. Here’s the latest news on each of the three funds in question.
Woodford Equity Income
Woodford’s main vehicle, the somewhat poorly named Woodford Equity Income, was the most troubled of his funds – its significant holdings in unlisted, hard-to-value firms were what triggered the suspension in the first place.
The fund is in the process of being prepared for winding up. BlackRock is managing the more liquid side of the portfolio and has already sold shares worth more than half of the value of the fund. Meanwhile, specialist broker Park Hill is working on the illiquid assets. As of mid-December it had yet to sell any of these.
Fund administrator Link Fund Solutions has told investors to expect their first payment around 20 January, and that they will be updated on its value on 13 January.
Woodford Income Focus
Woodford’s other open-ended offering was far more traditionally constructed than its larger sister fund. As a result, there was more demand from rival managers to take over the running. That battle has been won by Aberdeen Standard Investments, reports Citywire.
The fund will be run by Thomas Moore and Charles Luke, and it will be renamed ASI Income Focus. The aim is for the £264m fund to re-open in February, although an exact date will be confirmed with investors in mid-January. All parties involved will be waiving their fees until the end of May. The managers aim “to run a focused portfolio of around 30 stocks”.
The former Patient Capital
Finally, Woodford Patient Capital – the investment trust launched under Woodford – has been taken over by asset manager Schroders and now has a new name: it is the Schroder UK Public Private trust (LSE: SUPP). It will be managed by Schroders’ private-equity team. Crucially, the trust’s overdraft has also been renewed for another year.
In terms of fees, investors in the trust will be paying 1% on the first £600m of assets, and 0.8% thereafter, but no fee is payable for the first three months, notes FT Adviser. (Woodford had never taken a fee for the trust as a result of its poor performance.)
The trust currently trades on a discount to net asset value (the stated value of its underlying portfolio) of around 36%. Should you invest? The future looks brighter than it did – but given the level of uncertainty over the ultimate value of its holdings, we’d still steer clear at this stage.