Neil Woodford’s Long Fall From Grace
Neil Woodford’s Long Fall From Grace
(Bloomberg) -- Neil Woodford, once one of the most-celebrated U.K. fund managers with a loyal following and billions of pounds under management, has been fired from his flagship equity fund ahead of its liquidation.
Here’s a timeline of key events to show how we’ve got here:
Late 1980s-2014
Works at Invesco Perpetual where he would make his formidable reputation with contrarian bets. As a manager, he kept dot-com stocks out of his portfolio at the turn of the millennium, and before the financial crisis in 2008 he began building stakes in defensive stocks like British American Tobacco Plc and GlaxoSmithKline Plc, while eschewing banks. He had amassed about 33 billion pounds ($42 billion) in assets at the time of his departure.
Striking Out on His Own
April 2014
Woodford leaves Invesco after more than 20 years to set up his own firm with Craig Newman, formerly head of retail sales at the asset manager. St. James’s Place Plc pledges to follow him with 3.7 billion pounds even before he turned on the lights of his new firm. The day Woodford announced he was moving on, Invesco’s shares slumped more than 7%.
He adds a “stewardship code” on the company’s website, promising openness and transparency in dealing with investors. Woodford posts his positions on his website.
Epic Gains
2015
In the stock picker’s first full year managing the fund, it rose 16% and beat all 50 of his peers tracked by Bloomberg.
Woodford piggybacks off the positive performance to launch an investment trust, the Woodford Patient Capital Trust Plc, which raised 800 million pounds before going public in April 2015, a record for the U.K. investment industry.
Style Shift
2016
In its second full year, Woodford’s flagship fund struggles. It rose 3.2% in 2016 compared with a 14.4% gain on the FTSE 100 Index. Importantly, this is the year the fund begins shifting out of large-cap companies into smaller companies in earnest. Micro-, small- and mid-cap stocks made up almost 55% of the portfolio by the end of the year, according to data compiled by Morningstar Inc.
2017
It is the worst yearly performance since Woodford broke out on his own, with the fund rising less than 1%. It also marked the year when micro- and small-cap stocks overtook large-cap stocks in the flagship fund. By the end of the year, the holdings are almost 74% of the total.
The manager remains confident about the outlook for the U.K. in 2017, saying investors had become far too pessimistic after the Brexit vote. He shifts the fund toward domestic-focused companies including Lloyds Banking Group Plc and a number of homebuilders.
Huge Losses
2018
Woodford’s performance sags, with the flagship fund down 16.5%. It had trailed the benchmark index every year since 2015 and his performance over three years ranked in the bottom percentile among peers. Mid-, small and micro-cap holdings now account for 90% of the whole portfolio.
April 2019
Mid-, small- and micro-cap companies make up an almost 97% allocation of the fund.
Fund Suspension
June 3, 2019
Kent County Council, a local U.K. pension fund and one of Woodford’s investors, asks to redeem its entire investment from the flagship fund. The council had invested 200 million pounds in 2014 and a further 60 million pounds two years later. Its investment was valued at 263 million pounds at the end of April.
The move prompts Woodford to suspend redemptions from the fund. The council doesn’t get its money back.
Hargreaves Lansdown Plc, one of Woodford’s long-time allies, removes Woodford’s fund from its Wealth 50 list of favorites.
Backers Retreat
June 5, 2019
St. James’s Place cuts its ties with Woodford. Hargreaves said it will waive its platform fee for investors in the fund.
June 10, 2019
Woodford says he will only publish the top 10 holdings of his three funds while redemptions are frozen. The move is an abrupt shift from a long-standing commitment to provide transparency about investments.
FCA Investigation
June 18, 2019
The U.K.’s top financial regulator the Financial Conduct Authority opens an investigation into the events leading to the decision to halt redemptions. The investigation will look closely at investments in unquoted securities listed on a stock exchange in Guernsey, according to the FCA.
June 26, 2019
Bank of England Governor Mark Carney reprimands investment funds that hold illiquid assets but allow for daily withdrawals, adding pressure on firms like Woodford.
“These funds are built on a lie, which is that you can have daily liquidity, and that for assets that fundamentally aren’t liquid,” Carney tells a parliamentary committee. “That leads to an expectation of individuals that it’s not that different than having money in a bank. You get a series of problems, you get a structural problem but then you get a consumer issue.”
Employees Leave
July 2019
A number of longtime Woodford employees leave the firm, including Will Deer, who oversaw institutional sales, and Saku Saha, one of the firm’s top fund managers. Deer and Saha had worked alongside Woodford for years at his own firm and before that at Invesco. These departures followed an announcement that the firm was reducing headcount as its assets shrunk. The firm employed 45 people at the end of March 2018.
July 17, 2019
The head of the U.K.’s financial watchdog weighs in.
“We view incidents like the Woodford affair as an example of this -- where firms are following the letter, but not the spirit, of the rules,” Andrew Bailey, head of the Financial Conduct Authority, said at the regulator’s annual public meeting. “It raises questions about the rules themselves.”
Fund to Liquidate
July 2019
Between July 3 and July 8, Woodford sells about 1.75 million shares in the trust -- or 60% of his holding -- to meet “personal financial obligations, including a tax liability,” according to a separate statement. He notified the board of the sales on July 27. The delay to the disclosure to the board is widely criticized.
July 29, 2019
The manager’s listed investment trust announces it is considering replacing him as portfolio manager. The board of the Woodford Patient Capital Trust begins meeting with a range of fund managers and says it’s considering all options.
Woodford’s fund administrator Link Fund Solutions Ltd. says the fund may remain locked until early December.
Oct. 15, 2019
Neil Woodford is ousted from the fund by its administrator, Link Fund Solutions, and BlackRock is appointed to liquidate the listed holdings in the fund. PJT Park Hill, a division of investment bank PJT Partners Inc., was hired earlier in the year and will sell the unlisted positions.
Neil Woodford immediately objects, saying, “This was Link’s decision and one I cannot accept, nor believe is in the long-term interests of LF Woodford Equity Income fund investors.”
--With assistance from Silla Brush.
To contact the reporters on this story: Suzy Waite in London at swaite8@bloomberg.net;Lucca de Paoli in London at gdepaoli1@bloomberg.net
To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Ross Larsen
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