Woodford shares £20m windfall

Shamed fund manager split dividend with business partner as his empire crumbled

NEIL Woodford and his business partner raked in almost £20m last year as cracks started to appear in their investment empire.

The disgraced fund manager and Craig Newman, 49, who together set up Woodford Investment Management in 2014 after leaving Invesco, have always paid themselves in chunky dividends rather than through a salary.

Between 2014 and 2018, they earned a total of £98m in dividends and profits. For the year to March 2019, rough calculations indicate the pair pocketed almost another £20m just months before their business imploded.

Two thirds of this will have gone to Woodford, 59, in line with his ownership stake in the firm, meaning he will have paid himself close to £13m.

Justin Modray, of Candid Financial Advice, said: ‘News of another bumper dividend for Woodford and Newman will add to the significant scorn I imagine investors in Woodford funds already have for the pair.’

Woodford’s troubles began in earnest in June, when, after two years of poor performance, he ran out of ready cash to return to investors who were exiting his flagship Equity Income fund.

He was forced to freeze investors’ money in the fund to give him time to sell some of the assets and raise cash. But after four months of suspension, Link Fund Solutions – which oversees the management of the fund – pulled the plug. It fired Woodford earlier this month, and appointed managers to sell all the assets and return the money to investors. Hours later, Woodford quit from the Income Focus fund and Patient Capital Trust and announced he would shut down his investment empire.

The Woodford saga is causing problems for other fund managers, as administrators like Link worry that they could be penalised if funds they oversee run out of cash like Woodford Equity Income.

Several fund managers have been told by their administrators that their funds could be suspended unless they make efforts to reduce their exposure to difficult-to- sell assets so investors can get their money back easily.

Including the most recent dividend, Woodford alone has pocketed around £76m since setting up. Investors who put £10,000 into his Equity Income fund when it launched in 2014 would be sitting on just £8,480. Savers who put the same amount into his Income Focus fund when it was set up in 2017 would have an even measlier £7,410. And anyone who bought £10,000 of shares in the Woodford Patient Capital Trust when it launched in 2015 would be holding stock worth just £3,620.

Luke Hildyard, director of the High Pay Centre, said: ‘ It shouldn’t be possible for directors to profit so lavishly from such disastrous performance.’

The dividend calculations, by the Financial Times, assume that Woodford charged an average fee of 0.5pc on the £12bn of assets his firm had under management during the year to March 2019.

A spokesman for the company confirmed the calculation was correct. Woodford Investment Management results are due at the end of the year.