Neil Woodford’s comeback doomed from the start as ‘misled’ investors balk

Neil Woodford has had plenty of time to consider his options following the spectacular implosion of his business just 16 months ago.

But a decision by the former star fund manager to launch an audacious comeback in a national newspaper just over a week ago is likely to be a move he already regrets.

The interview with The Sunday Telegraph on 14 February had it all: An apology to investors (albeit half-hearted and limited to just investment performance), some tears, and a sob story as Woodford revealed his own financial struggles had forced him to sell his £30m estate in the Cotswolds.

If Woodford and his new team of PR advisers were hoping his performance would lead to redemption, they were sadly mistaken.

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The hundreds of thousands of investors stranded by Woodford are understandably furious that the former star fund manager is plotting a return to managing money.

Savers in his once best-selling Equity Income fund are nursing heavy losses following its closure in October 2019, with around £200m still tied-up in the vehicle as some of the harder to sell assets are yet to be offloaded by administrators.

Quite right, then, that investors want assurance from the Financial Conduct Authority that lessons have been learned from the Woodford scandal, and that those responsible for their ordeal will be held accountable.

The 60-year-old said he wants to shift his focus on winning business from professional clients. But it may not be so plain sailing.

Woodford would do well to remember that some of the City’s largest investors, which were eager to back him when he left Invesco in 2014, were among the first to bail on him when they sensed his flagship fund was straying dangerously into less liquid companies.

As part of research for my book on Woodford’s rise and fall, When the Fund Stops, I interviewed John Chatfeild Roberts, who oversees the Merlin fund range at Jupiter Fund Management — one of Woodford’s earliest backers.

Chatfeild Roberts outlined how concerns with the liquidity profile of Equity Income prompted the asset manager to gradually sell down its stake in the fund, offloading chunks of between £5m and £64m per deal.

“Were we misled? We expected him to up the ante on unquoteds a little, but didn’t expect it to be much different to what he did previously at Invesco,” he told me.

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Other large investors also lost confidence in Woodford, with Aviva Investors and Abu Dhabi Investment Authority among the other big name clients that dropped him.

St James’s Place, another one of Woodford’s biggest backers, dealt the biggest blow. It notified the fund manager that it was withdrawing a £3.5bn mandate just moments after it had announced its decision to its clients.

As one of Woodford’s former colleagues put it: “St James’s Place was just another example of someone saying ‘fuck you’.”

Winning over heavyweight investors is the least of Woodford’s worries for now.

Perhaps the fund manager’s biggest obstacle to his comeback is the fact his ambitions appear to have caught financial regulators by surprise.

Last week the FCA issued an after hours statement to remind Woodford that if he wanted to return to fund management and operate a business in the UK, he would first need their authorisation to do so.

There is also the painfully slow FCA investigation into the collapse of his former flagship fund, which could still have a bearing on whether the regulator decides to give the green light to his new venture.

The FCA’s director of enforcement and market oversight, Mark Steward, indicated that any authorisation would take into account factors such as “the sustainability of the firm’s business model and the fitness of its management”.

The financial regulator in Jersey, where Woodford plans to base his new outfit, was equally surprised by his comeback plans. It said it hadn’t yet received an authorisation application and suggested any announcement of plans should be suffixed with “subject to regulatory approval.”

Woodford’s attempt at an apology hasn’t gone down well with his former investors. But if he is to stand any chance getting his new business up and running, Woodford may have some explaining to do (as well as more apologies) in the weeks ahead as regulators seek to understand why he jumped the gun with his comeback plans.

When the Fund Stops: The untold story behind the downfall of Neil Woodford is published by Harriman House.

To contact the author of this story with feedback or news, email David Ricketts