Former City darling’s downfall should act as a cautionary tale
So-called ‘superstar’ fund managers have lost their sparkle after the Woodford fiasco, says Keith Findlay
“Until recently it seemed Mr Woodford could do no wrong”
The woes of former City darling Neil Woodford underline how those who gain a Midas-like reputation for picking the best stocks to invest in can quickly fall from grace.
Until recently, it seemed Mr Woodford, the founding partner of Woodford Investment Management (Wim), could do no wrong.
He built an enviable track record for choosing stock market winners, while funds under his control delivered handsome returns for investors.
But things turned sour for him earlier this year following two years of poor performance.
In June, trading in the largest of his Wim funds – the near £3 billion Woodford Equity Income Fund (Weif) – was suspended after large withdrawals by many investors.
Trading in the associated Woodford Equity Income Feeder Fund was also suspended.
St James’s Place ended
Mr Woodford’s contract to manage three of its funds, valued at £3.5bn, as the Financial Conduct Authority, which regulates the sector, launched a formal probe into the suspensions and the events leading up to them.
Wim quickly gave assurances its other funds would be unaffected, but these were not enough to stop a slump in the share price of Woodford Patient Capital Trust amid concerns of knock-on effects.
Shares of a raft of stocks counting Mr Woodford’s fund among their biggest investors also fell heavily.
Disposals aimed at raising cash for the Weif have brought in hundreds of millions of pounds.
These include the sale of a near-16% stake in activist investor Crystal Amber, whose portfolio includes a large stake in North Sea oil company Hurricane Energy.
Last week, the supervisor behind Mr Woodford’s funds, Link Fund Solutions, unveiled plans to wind up the Weif.
Mr Woodford, 59, was also forced to step down as manager of the fund.
Link is now seeking a new manager to take on the £258 million Woodford Income Focus Fund, but has warned it may be forced to sell off more assets and close it instead.
Mr Woodford, who was made a CBE in the Queen’s birthday honours in June 2013 and subsequently received an honorary fellowship from London Business School, has been criticised for putting too much money into assets that were difficult to redeem for cash.
When Weif investors started withdrawing too much, this made it impossible for the fund to meet their demands.
Several law firms are investigating the potential for compensation claims on behalf of savers who invested in the suspended Wim funds through intermediaries.
TROUBLED: Neil Woodford, the founding partner of Woodford Investment Management