The high profile career of investment manager Neil Woodford appears to be over after the one-time star stockpicker was fired from his flagship fund and quit as manager of his remaining two funds.
Woodford was sacked on Tuesday morning from his £3.1bn Equity Income fund, which will be wound up in an effort to return cash to investors more than four months after its shock suspension.
The move was a major embarrassment to the former City investment guru, once referred to as the “Oracle of Oxford”, and on Tuesday evening he stepped down from his Income Focus Fund and the Woodford Patient Capital investment trust.
Woodford said he was closing down his business, based at an Oxford business park, which he started in 2015 after earning his reputation over 25 years at Invesco Perpetual. His three-decade career as a high-profile money manager now looks over.
Woodford said: “We have taken the highly painful decision to close Woodford Investment Management. We will fulfil our fund management responsibilities to WPCT and the LF Woodford Income Focus Fund and once completed will close the company in an orderly fashion.”
Losing the management fees from running the Equity Income Fund, which generated £65,000 a day, would have left the company unable to cover the group’s £12m salary and pension costs.
The business has generated millions for Woodford and his partner Craig Newman. In the 2017 financial year alone the pair shared £36.5m. Over the past four years he himself has collected £63m. Investors in his Equity Income Fund have lost 37% of their investments over the past three years.
Woodford added on Tuesday night: “I personally deeply regret the impact events have had on individuals who placed their faith in Woodford Investment Management and invested in our funds.”
The Equity Income fund’s administrators, Link Fund Solutions (LFS), said the decision to shut down the Woodford Equity Income Fund was in the best interest of investors. They will start receiving payouts after the wind-up begins in January 2020.
It is understood that Woodford was first told about Link’s plans on Monday. He opposed the move, which removed him as investment manager with immediate effect, and in a statement issued on Tuesday he insisted it was a bad decision which “I cannot accept, nor believe is in the long-term interests of LF Woodford Equity Income Fund investors.”
Neil Woodford was once the UK’s biggest star fund manager, personally managing a £25bn mountain of money on behalf of pension funds and other investors at Invesco Perpetual. When he decided to quit Invesco and go it alone in 2013 it was a huge shock for the fund management industry. Invesco shares slumped by 7% on the day he announced his departure.
At Invesco Woodford held control of huge stakes in some of the UK’s biggest firms, and his opinions mattered. His criticism of AstraZeneca chief executive David Brennan in the 2012 shareholder spring was widely regarded to have cost him his job, and his critique of BAE’s attempted £28bn merger with Airbus is acknowledged as one of the reasons the deal collapsed.
Woodford, who was widely referred to in the media as an investment “hero” and fund management “star”, had done exceedingly well over his quarter century there. A £1,000 investment placed when he started at the firm in 1988 would have risen to £23,000 by the time he left.
Woodford accidentally fell into fund management and hadn’t heard of the term until he rocked up in the City in the 1980s sleeping on his brother’s floor while looking for a job. He got his first break in insurance, before drifting into fund management. He had left school wanting to fly fighter jets but couldn’t pass the RAF’s aptitude test, and instead read economics and agricultural economics at the University of Exeter.
Feeling he had outgrown Invesco Perpetual, he set up his own firm Woodford Investment Management in 2014, on an industrial estate near Oxford. Within two weeks of launching, he had raised £1.6bn, a UK record, and it quickly grew to £16bn. In its first full year his flagship fund returned 16% and Woodford, a devotee of veteran US investor Warren Buffett, was dubbed the “Oracle of Oxford”.
Asked if he ever doubted his judgment, Woodford once said: “Daily. You must never, as a fund manager, stick your head in the sand saying ‘everybody go away, I’m right, I’m right, I’m right’. You’ve always got to expose yourself to criticism and the analysis that you may be wrong.”
Woodford went on to say that the secret of successful fund management was a balance of arrogance and humility. “You have to have a sufficiently strong arrogant gene to back your judgment, back your conviction. If you didn’t, you would end up with a portfolio that looks very much like the index. But, equally, you must have the humility to accept that you will get things wrong.”
In a letter to investors, LFS said cash would be returned to investors “at the earliest opportunity” – although it was unable to say how much of their original investment would be salvaged.
The amount that can be returned will depend on how much fund manager BlackRock and investment banking firm PJT Partners, which have been appointed to wind-up the fund, can raise from selling the remaining assets, minus the fees charged for their work. Their fees have not been disclosed.
The shutdown comes more than four months after Woodford was forced to block investors from withdrawing their money from the Equity Income fund, following a string of bad investment bets that prompted a surge in redemptions that he could not fulfil.
The fund, which was once worth more than £10bn is now worth only around £3bn, due to withdrawals and a raft of poorly performing investments, including online estate agent Purplebricks, finance firm Burford and doorstep lender Provident Financial.
He once said the key to successful investing was to “have a sufficiently strong arrogant gene to back your judgment, back your conviction.”
The fund manager has been criticised since the fund was gated for failing to suspend his firms management fees. He argued the fees were needed to pay wages and other costs while he shifted investments away from smaller, illiquid assets into larger publicly quoted companies.
Ryan Hughes, the head of active portfolios at the investment platform AJ Bell, said: “Investors will still be incurring high costs for the winding-up of the fund, particularly selling off the illiquid assets. These costs will be taken out of any proceeds from the sale, so will eat into the money investors get back.”
Hughes said an assessment carried out earlier this year showed that a third of the fund was tied up in assets that could take six months to a year or more to liquidate. “The portfolio has shifted a bit since then, but it [is] unlikely to be a quick process,” he added.
