Neil Woodford’s Return Defies Darwinism
(Bloomberg Opinion) -- Neil Woodford, the storied U.K. fund manager who spectacularly crashed 16 months ago, is planning a comeback. If he’s successful in persuading investors to make him the steward of their money once again, it will defy economic Darwinism.
Woodford was forced to close his eponymous firm in October 2019 after the administrators of his flagship fund dismissed him as its manager. He’d allocated more and more funds to unlisted and smaller stocks in an effort to turn around the dismal performance of his portfolios. When too many investors demanded their money back in June 2019, he had to suspend redemptions, leaving thousands of small and institutional investors and about 3.5 billion pounds ($4.9 billion) trapped.
The Financial Conduct Authority is still making its ponderous inquiries into the collapse of his funds, focusing on whether Woodford played too fast and loose with the definition of what counts as a liquid investment. The FCA has said that his maneuver of listing some of his illiquid holdings in Guernsey, in an effort to avoid violating limits on hard-to-sell holdings to no more than 10% of a portfolio, may have followed the letter of European regulations though not their spirit. That suggests the rules needed to be tighter, and in the wake of Brexit, the U.K. regulator is free to redraft its rulebook more strictly.
In an interview with the Telegraph published over the weekend, Woodford said he was sorry for his failure to generate investment returns, but that the decision to liquidate his funds, which was “incredibly damaging to investors,” wasn’t taken by him.
Woodford may be able to bounce back by focusing on the biotech industry. Synairgen Plc, a publicly traded firm he had a stake in, has gained more than 3,000% since the start of 2020 after its Covid treatment regime showed promise. One of the private companies he previously backed, Oxford Nanopore Technologies Ltd., has raised millions of pounds from investors after developing a rapid coronavirus test last year.
So he clearly has some acumen in biotech. It won’t hurt that the industry is also favored by the investment world’s current hottest stock picker, Cathie Wood of Ark Investment Management LLC. But Woodford’s recent history will make his new venture a hard sell.
The new fund, Woodford told the Telegraph, will cater only to institutional investors. That’s probably wise, given the damage his previous venture inflicted on retail savers. “You can imagine lots of people who have read the media about me wouldn’t want to touch me with a ten-foot disinfected bargepole,” Woodford said.
Given that his brand has taken a beating, you can’t help wondering why the new firm is called Woodford Capital Management, rather than something more generic and less tainted.
If Woodford fails to attract capital, don’t be surprised if he reemerges in the not-too-distant future with the stock market’s current vehicle of choice for out-of-favor finance executives — a special purpose acquisition company, although possibly one without his name at the top of the marketing literature.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."
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