JEFF PRESTRIDGE: HOW CAN THIS CLOWN RETURN AS A FUND BOSS?
MUCH to the chagrin of most of his former investors, fund manager Neil Woodford is on the comeback trail. Or so he hopes. Seven days ago, 60-year-old Woodford broke cover to reveal his plans to launch a new investment business based in Jersey. This is some 16 months after being fired from running Woodford Equity Income – a multi-billion pound fund that was initially suspended in June 2019 because of acute liquidity issues, but has since been wound up, leaving hundreds of thousands of investors nursing big losses.
While Woodford said he was ‘very sorry’ for what he had done ‘wrong’ – and shed the odd crocodile tear along the way – it did not appear that the former investment star of the 1990s (when he was employed by Invesco Perpetual) was overwhelmed by contrition.
Far from it. For every sorry, there was an accompanying dose of self-pity as he talked about the £ 30 million Cotswolds home he was forced to sell as a result of a break-up of his business (Woodford Investment Management) – and being confronted by angry investors on the beach near Devon where he now lives.
(Neil, where did all the money go that you withdrew from WIM by way of dividends – estimated as being £50million between 2017 and 2019? Fast cars? Yes. Horses? Yes. But what about the rest?)
Certainly, judging by the contents of my mailbag over the last few days, there is little love left for the investment manager who turned a traditional equity income fund into one horribly exposed to risky unlisted securities and illiquid stocks. A wolf in sheep’s clothing.
‘ How can this tearful clown be allowed to be a fund manager again?’ asked one. ‘ He is still treating his former investors with a degree of contempt,’ said another. ‘No amount of crying to the press is going to change the opinion of those poor investors who in some instances have lost a fortune, albeit not in the sense of how Woodford would define a fortune.’
Most appositely, given the campaign we ran on this issue, one investor said that any return of brand Woodford should not be allowed to happen until he repays the fees (some £65,000 per day) that he earnt from the time the Equity Income fund was suspended to the day he was sacked. Fees that added to the losses of investors.
It remains to be seen whether project Woodford Reinvention happens. Judging by the regulatory mood music coming out of both London’s Stratford (home of the tardy Financial Conduct Authority) and Jersey, there is every chance that he could be scuppered in his wish to set up Woodford Capital Management Partners – a business aimed at ‘professional’ investors only.
Certainly in the immediate future.
While former investors have every right to be angry over Woodford’s chutzpah, they should also be venting their spleen at the Financial Conduct Authority. For 20 months, it has been investigating the events leading up to the suspension of Woodford Equity Income.
YET apart from an unexpected late- night statement ( presumably forced by the open letter from the True & Fair Campaign) issued last week by its director of( non) enforcement and market oversight on how its investigation is progressing (slowly), it has shown little sign of wanting to get the job done.
Maybe it’s because the regulator is as culpable as other parties involved in the Woodford Equity Income debacle – Hargreaves Lansdown ( the fund’s greatest supporter right up until the day its shares were suspended); Link (the fund’s authorised corporate director, responsible for ensuring Woodford was not breaching any rules); and of course Woodford himself.
The regulator knew that Woodford Equity Income had liquidity issues as early as 2018, but failed to take decisive action, leading ultimately to the fund’s suspension in 2019.
A document seen last week by The Mail on Sunday casts further doubt on the regulator’s robustness. Dated January 2018 and drafted by Woodford, it addresses concerns raised by Old Mutual Wealth about shares traded between the fund Woodford ran for them (Old Mutual Woodford Equity Income) and the flagship Woodford Equity Income.
It states that on 230 occasions, Woodford traded between his main fund and this sister fund because of ‘significant inflows into and out of’ Woodford Equity Income. In the words of Woodford, ‘there was a challenging backdrop of progressive outflows in 2017’.
In 2017 alone, there were 93 sales from the flagship fund to this other fund. In other words, shares were sold from the Woodford Equity Income fund and bought by the Old Mutual Wealth fund to free up cash to meet redemptions.
There is nothing illegal about trading between funds managed by the same manager. Indeed, Quilter, owner of Old Mutual Wealth, confirmed to The Mail on Sunday last week that the integrity of its fund was not compromised by such trades. But the scale of them looks unusual to say the least.
Also, and crucially, it reveals that Woodford Equity Income was facing liquidity issues as far back as early 2017 – way before the regulator started to take an interest in the fund. Surely it is now time for the regulator to pour more resources into its investigat i on i nto Woodford Equity Income. The longer its probe goes on, the greater the suspicion that it is overseeing a whitewash.
The Mail on Sunday understands from a source that up until Christmas last year, key former staff at Woodford Investment Management had not been approached by the regulator about the suspension of the fund. One of those key staff – the former head of risk – refused to answer our questions last week (over the phone and by email). If this is the case, it is a terrible indictment of the amateurism of the FCA’s investigation.
Late last week, the Treasury Select Committee ramped up the pressure on the FCA by asking it to confirm when it expects its investigations to be completed. The FCA responded by saying that it would update the committee by the end of May. Not good enough.
Meanwhile, Alan and Gina Miller of the True & Fair Campaign – an organisation dedicated to ensuring a fairer financial services industry – called for an independent investigation to be set up into the Woodford scandal. The Millers are rightly angry that the FCA is ‘marking its own homework’.
Until such time that investors get financial justice and those involved in the Woodford debacle are fully held to account, Neil Woodford should not be allowed to step back into investment management.
‘He is treating investors with contempt’