Neil Woodford to close down investment funds

Stellar career seems over as manager shuts last two funds following sacking from flagship £3.1bn venture

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.”

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.”

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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.

Contributors

Kalyeena Makortoff and Julia Kollewe

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